‘Bond King’ Jeff Gundlach warned rates could go ‘much, much higher.’ Days later, the 10-year yield hit a 19-year high
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Billionaire investor Jeffrey Gundlach, better known as Wall Street’s “Bond King,” warned investors last week (1) that interest rates could go “much, much higher.”
Days later, the bond market nodded, and the 10-year Treasury yield shot to 5.228% (2), a 19-year high. The last time rates were so high was June 2007 (3), just months before the Great Recession.
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“It looks like we’re on a collision course or something,” Gundlach said.
He also warned that “defaults are going to start coming in fast and furious” if rates continue climbing, and outlined a scenario where long-term Treasury yields rise above 6%.
The 10-year hasn’t hit 6% yet, but Americans are already feeling the squeeze from higher yields at home.
Why the 10-year Treasury yield matters
The 10-year Treasury yield serves as a key benchmark for borrowing costs (4) across the economy.
When its yield climbs, mortgages and other longer-term borrowing costs can rise. The average 30-year fixed mortgage rate reached 7.03% on September 24, according to Freddie Mac data (5). That’s up from 6.26% in September last year (6).
That difference can add up very quickly.
Take a $400,000, 30-year mortgage. At 6.26%, principal and interest come to roughly $2,464 a month. At 7.03%, it’s about $2,665. That’s roughly $201 more every month, or almost $2,400 a year, without borrowing an extra dollar.
And that money isn’t helping you pay down your house faster. At 6.26%, you’d pay about $24,837 in interest alone and knock $4,727 off your principal in a year. At 7.03%, you’d be paying $27,816 in interest while reducing your principal by only $4,163.
In other words, you pay thousands more a year just to watch your equity crawl along at a snail’s pace.
Luckily, you don’t have to sign a 7% mortgage to invest in real estate. You can tap into this market by investing in shares of vacation homes or rental properties through Arrived.
Backed by world-class investors, including Jeff Bezos, Arrived allows you to invest in shares of vacation and rental properties, earning a passive income stream without the extra work that comes with being a landlord of your own rental property.
To get started, browse their selection of vetted properties, each picked for its potential appreciation and income generation. Once you choose a property, you can start investing with as little as $100.
Add some gold to your portfolio
Gundlach has also been bullish on gold, and plenty of other investors seem to agree. They poured $18 billion into physically backed gold ETFs (7) during the month, pushing their collective holdings to a record 4,189 tonnes.
Gold gained 13.3% in August alone, according to Bullion Vault (8), making it the metal’s third-strongest monthly return in 25 years (9).
And if you’re worried about inflation or bond market turbulence, you may want some exposure to an asset that doesn’t depend on a company’s earnings or a government’s promise to pay interest.
One way to invest in gold that also provides significant tax advantages is to open a gold IRA with the help of American Hartford Gold.
Gold IRAs allow investors to hold physical gold or gold-related assets within a retirement account — combining the tax advantages of an IRA with the protective benefits of investing in gold, making it an option for those looking to potentially hedge their retirement funds against economic uncertainties.
Even better, you can often roll over existing 401(k) or IRA accounts into a gold IRA without tax-related penalties. To learn more, get your free 2025 information guide on investing in precious metals.
Qualifying purchases can also receive up to $25,000 in free silver.
Put higher rates to work
Gold is one way to hedge against uncertainty, but higher rates have also created an opening for savers to profit. One that doesn’t require buying an investment.
Say you’ve got $25,000 sitting on the sidelines while you’re figuring out your next move. At 0.40% APY, you’d earn roughly $100 in interest over a year. At 3.55%, that same $25,000 could earn roughly $888, assuming the rate stayed unchanged — all without the danger of the stock market.
A high-yield account like a Wealthfront Cash Account can be a great place to grow your uninvested cash, offering both competitive interest rates and easy access to your money when you need it.
A Wealthfront Cash Account currently offers a base rate APY of 3.55% through program banks. With a new client boost and direct deposit incentive, referred clients can earn up to a 4.55% APY.
That’s 10 times the national deposit savings rate, according to the FDIC’s August report.
With no minimum balances or account fees, as well as 24/7 withdrawals and free domestic wire transfers, your funds remain accessible at all times. Plus, you can access up to $8 million in FDIC insurance through program banks.
Give your retirement savings a floor
A big market drop is inconvenient when you’re 30 — but much harder to shrug off when you’re retired and withdrawing money from a portfolio that’s losing value.
Imagine you enter retirement with $500,000 and it drops 20%. You’re suddenly down to $400,000 before accounting for any withdrawals, and it has to climb 25% just to get you back to where you started.
That kind of loss could take decades to recover from. For someone already drawing down their savings, avoiding a loss in the first place matters just as much as chasing the next gain.
One option to consider is a fixed index annuity (FIA) from Ethos. It can help protect 100% of your principal from index-linked losses while giving you the opportunity to earn interest based on a market index’s performance.
When the index rises, you can earn interest based on its gains, subject to applicable limits such as the current annual cap rate of up to 10.5% on S&P 500 Index Accounts. When the index falls, a 0% guaranteed floor means index-linked losses won’t reduce your principal.
An FIA can also help you diversify your retirement income strategy. When you’re ready to start taking income, you can convert your savings into predictable income and — for those 59 and older — get lifetime guaranteed income.
If you want to explore whether an FIA fits your retirement strategy, book a free consultation with Ethos.
Not available for residents of New York.
Bulletproof your portfolio
You don’t have to rebuild your entire portfolio because the 10-year Treasury crossed 5%. But this is a good time to ask what happens to your plan if 6% is truly on the horizon.
If you have a $500,000 portfolio, even a 5% move means deciding the fate of $25,000. At $1 million, that same seemingly small adjustment involves $50,000.
That kind of money warrants a second opinion.
If you have a portfolio of $250,000 or more, platforms like WiserAdvisor can connect you with vetted professionals who specialize in this kind of planning.
Simply answer a few questions about your savings, retirement timeline and overall investment portfolio.
From there, WiserAdvisor reviews its network to match you — for free — with up to three vetted, reputable advisors aligned with your specific needs.
You can then schedule no-obligation consultations with your matches to determine who best fits your long-term goals.
WiserAdvisor is a matching service and does not provide financial advice directly. All matched advisors are third parties, and specific financial results are not guaranteed.
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Article Sources
We rely only on vetted sources and credible third-party reporting. For details, see our ethics and guidelines.
Business Insider (1); Mortgage News Daily (2); CBS News (3); Federal Reserve Bank of St. Louis (4); Freddie Mac (5); Realtor.com (6); World Gold Council (7); Bullion Vault (8); Livewire Markets (9)
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.