Market news :: Investing, Earnings & Money

Gundlach expects U.S. 10 year T note yield to drop below 2.25 percent


Jeffrey Gundlach, chief executive of DoubleLine Capital, said on Friday he expects the yield on the benchmark 10-year U.S. Treasury note to drop below 2.25 percent as global investors seek safety."There is a stealth flight to safety going on. German bond yields are leading the way down," Gundlach said in emailed comments. "Gold is rising. Speculators remain massively short bonds and the market is going to squeeze them out." Late on Friday, the yield on the 10-year note US10YT=RR was near 2.32 percent, compared with 2.388 percent late on Thursday. Yields fell as low as 2.313 percent, the lowest since Jan. 17. Gundlach, who oversees $101 billion, first introduced his view on the 10-year yield's bottom in January. He then said on an investor webcast: "I think the 10-year Treasury will go below 2.25 percent ... not below 2 percent" before edging up again. Gundlach said with the recent rally in the bond market, the U.S. Treasury should consider issuing ultra-long-term obligations.

"I’d issue the longest maturity Treasuries that the market accepts," Gundlach said. "Start with 40-year, then keep extending if the market allows it. Do 100 if you can get there. The timing is good right now."Wall Street diverged from the bond market and edged higher on Friday, with the Dow extending its streak of record-setting gains to 11 days. [. N/C]

Gundlach noted: "Stocks are out of synch with the stealth flight to safety. Lots of hope built in."Gundlach, known on Wall Street as the 'Bond King', said in December: "The bar was so low on Trump to the point people were expecting markets will go down 80 percent and global depression - and now this guy is the Wizard of Oz and so expectations are high. There's no magic here."DoubleLine Total Return Fund, the Los Angeles-based firm's flagship fund with $54.7 billion in assets, has trailed its peer category so far this year.

According to Morningstar data on Friday, DoubleLine Total has posted year-to-date returns of 0.70 percent, lagging 73 percent of its peer category. On a three-year basis, however, DoubleLine Total Return Fund has posted returns of 3.67 percent, easily surpassing 92 percent of its peer category, according to Morningstar.

Peak gasoline demand looms with engine efficiency gains


Demand for gasoline in the United States, which accounts for a tenth of global oil consumption, is expected to peak next year as engines become more efficient, WoodMackenzie analysts said. Global demand for gasoline, which accounts for more than a quarter of the world's oil consumption, is set to peak as early as 2021 even in the face of relentless growth in the vehicle fleet, according to the Edinburgh-based consultancy. A rise in the number of hybrid and electric cars such as the Nissan (7201. T) Leaf, Toyota (7203. T) Prius and Tesla (TSLA. O) as well as tighter fuel standards in Europe and the United States will contribute to a historic shift in consumption. The United States saw spectacular growth in gasoline demand following the collapse in oil prices in 2014 and as its economy recovered from the 2008 financial crisis, reaching a record high of 9.326 million barrels per day last year. Gasoline demand is expected to grow to peak of around 9.45 million tonnes in 2017 and remain largely unchanged in 2018 before slipping to 9.28 million tonnes in the following year, according to WoodMac."We expect gasoline engine efficiency to continue to improve through better deployment of batteries in hybrid vehicles," WoodMac analyst Alan Gelder said. An expected recovery in oil prices in coming years is also expected to curtail demand growth, he added.

At its peak, global gasoline demand is expected to reach 25.89 million barrels per day (bpd) in 2021, accounting for roughly a quarter of oil demand. The decline in U.S. and European gasoline consumption will mask a steady expansion in demand in Asia, where most of the global increase in the vehicle fleet will take place. While engine efficiencies increase, the global gasoline car fleet is expected to grow by more than 10 percent by 2025 to above 1 billion vehicles, according to WoodMac. Vitol, the world's top oil trader, last month said it expected global demand for gasoline and diesel to peak in 2027-2028.

NO PEAK The question of when oil demand will reach its apex has been one of the most central and divisive for the industry, which faces the prospect of a world almost free of fossil fuels by the end of the century if a U. N.-backed plan to stem global warming is enforced. Some companies, including Royal Dutch Shell (RDSa. L), the world's second-largest oil and gas company, say oil demand could peak in the 2030s. The International Energy Agency, the West's energy watchdog, expects oil consumption to grow in the foreseeable future, albeit at much slower rates.

"We still see global oil demand growing but the role of transportation shrinks," Gelder said. Growth will be driven by the petrochemical sector, which uses oil feedstocks to produce plastics, as well as demand for diesel and gasoil from the commercial transportation sector, particularly buses, ships and planes, he added. The world's car fleet, including diesel cars and trucks, is set to grow by some 20 percent to 1.32 billion by 2025, according to WoodMac. But the pace is expected to drop sharply compared to historic rates."Traditionally we had