Gundlach says ‘LQD’ corporate bond fund looks like the most overvalued bond asset because of Fed

Investing News

Jeffrey Gundlach speaking at the Sohn conference in New York on May 4, 2016.

David A. Grogan | CNBC

Billionaire hedge fund manager Jeffrey Gundlach said a popular exchange-traded fund is incredibly overvalued given some of the Federal Reserve’s actions to support the economy during coronavirus pandemic.

“The LQD looks to be about the most overvalued asset in the bond market to me,” Gundlach told CNBC’s Scott Wapner on “Halftime Report,” referring to the  iShares IBoxx $ Investment Grade Corporate Bond ETF (LQD). “These things are up way off their lows.”

The ETF has rallied nearly 23% since hitting a low on March 19. Gundlach also noted the ETF came within 3% of a record after the Fed announced on April 9 it would buy corporate bonds through exchange-traded funds. 

“The Fed action has certainly swooped that up,” he said. 

That rally in corporate bonds coincided with a massive surge in equity prices. Since late March, the S&P 500 has soared more than 25% and has retraced about half of its decline from the Feb. 19 highs. 

The Fed’s moves, coupled with giant fiscal stimulus measures, helped corporate bonds and equities off their coronavirus-crisis lows. 

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