'Bond King' Jeff Gundlach Says Fed Rate Is 'Too High' By 75 Bps, But Warns Cuts Unlikely Without Sharper Risk Asset Losses

Amid a historic market selloff that has erased approximately $6 trillion in U.S. market value, renowned fixed income investor Jeff Gundlach suggests the Federal Reserve’s current policy stance is too restrictive. However, he doesn’t anticipate immediate rate cuts.

What Happened: Gundlach, widely known as the “Bond King,” noted Monday that the 2-year U.S. Treasury yield has dropped to exactly 3.5%, implying that markets currently view the Federal Reserve’s benchmark rate as “at least 75 basis points too high.”

However, Gundlach cautioned that rate cuts are unlikely in the near term, adding, “I do not see a single cut any time soon, unless the losses in risk assets greatly increase.”

Gundlach’s comments come as the U.S. 2-Year Treasury yield fell to 3.541%, down 3.51%, while the 10-Year yield decreased to 3.934%, down 1.43%.

As of Monday, the CME FedWatch Tool shows a 52.1% probability of a 25 bps rate cut at the May 7 Federal Open Market Committee meeting, lowering the target rate to 400–425 bps. However, there’s still a 47.9% chance the rate remains unchanged at 425–450 bps.

The bond market signals coincide with a deepening global market rout triggered by President Donald Trump‘s sweeping new tariff policies. U.S. stock futures extended losses Sunday evening, with Dow futures plunging over 1,000 points, or 3.26%, while S&P 500 and Nasdaq futures tumbled 3.73% and 4.60% respectively.

Asian markets reflected similar distress, with Japan’s Nikkei briefly triggering circuit breakers after futures fell more than 8%. Hong Kong’s Hang Seng crashed 8.81%.

See Also: Bill Ackman Warns Against Launching ‘Economic Nuclear War,’ Wants A 90-Day Time Out On Trump Tariffs

Why It Matters: Despite mounting market pressure, the White House has remained firm on its tariff strategy. “I don’t want anything to go down, but sometimes you have to take medicine to fix something,” Trump said Sunday.

Treasury Secretary Scott Bessent attributed the selloff to tech valuations rather than administration policy, calling it “more a MAG 7 problem than a MAGA one,” referring to market leaders including Apple Inc. AAPL, NVIDIA Corp. NVDA, and Microsoft Corp. MSFT.

Fed Chair Jerome Powell has emphasized caution regarding rate cuts despite market turmoil, stating the Fed does not need to be in a hurry while warning that Trump’s tariff package could raise inflation.

Venture capitalist Chamath Palihapitiya suggested traditional market rescue mechanisms may no longer be politically viable, noting “the bottom 50% of Americans have zero interest in the stock market.”

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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.