Central bank policymakers have kept their target interest rate at 5.25% to 5.5% for the past year, creating a yield bonanza for investors in money market funds, certificates of deposit and Treasury bills.
Gundlach, speaking on CNBC's " Closing Bell " on Wednesday, said he sees the Fed enacting as much as 150 basis points worth of rate cuts in the next year, or 1.5 percentage points, which would lower the fed funds rate to 3.75% to 4.00%.
As interest rates come down, cash, short-dated instruments and floating-rate debt will also see lower yields, translating to less income for investors, he added.
In lieu of those bank loans, investors may want to consider migrating toward BB-rated, fixed-rate high yield bonds — high-yield issues, he said.
State Street offers the SPDR Portfolio High Yield Bond ETF (SPHY) .
Persons:
Jeffrey Gundlach, Jerome Powell, Gundlach
Organizations:
Federal, BB, Corporate Bond, SEC, State Street, Investors
Locations:
Central