Gundlach Warns Treasuries No Longer Risk-Free Due to U.S. Debt – Coincu

Jeffrey Gundlach, CEO of DoubleLine Capital, highlighted the unsustainable nature of U.S. debt and interest expenses, questioning Treasuries’ traditional risk-free status. This has significant implications for global investors.

His commentary, suggesting a shift from U.S. dollar-based assets, ignites interest in alternative markets, impacting asset allocation on a global scale.

Gundlach’s Risks Call: Treasury Status Shift

Jeffrey Gundlach, known as the “New Bond King”, stated on June 12 that U.S. debt levels and interest costs are unsustainable, drawing parallels to pre-dot-com bubble and financial crises periods. He advised investors to pivot towards non-U.S. dollar assets, as he believes long-term Treasuries are no longer risk-free.

This call for diversification impacts global asset strategies, highlighting the need for foreign currency exposure. The suggestion has prompted renewed interest in international assets and cryptocurrencies, as these sectors benefit from potential shifts away from U.S. market norms.

“There’s an awareness now that the long-term Treasury bond is not a legitimate flight-to-quality asset,” said Gundlach, underscoring the idea that U.S. Treasuries are no longer automatically risk-free: Bloomberg Talks.

Market responses are reflective; the S&P 500 saw a 0.3% drop, while the MSCI World index excluding USA gained. Significantly, the U.S. Dollar Index declined, coinciding with Gundlach’s statements.

Cryptocurrency Markets React to U.S. Dollar Concerns

Did you know? In past market cycles, increased exposure to foreign assets typically occurred when U.S. dollar confidence waned, as seen during the dot-com and financial crises.

According to CoinMarketCap, Bitcoin is priced at $107,904.77, with a market cap of $2.14 trillion, holding a dominance of 63.26%. Its 24-hour trading volume reached $52.95 billion, reflecting a 1.41% decrease. Bitcoin’s price dropped by 1.59% over the past 24 hours, though it has risen 5.20% over 30 days.

Insights from the Coincu research team suggest if U.S. dollar erosion continues, cryptocurrency inflows may rise further. Current fiscal sentiments could accelerate this trend, positioning Bitcoin and Ethereum as beneficiaries of macroeconomic shifts.