Jeffrey Gundlach, chief executive and chief investment officer of DoubleLine Capital, said Monday the U.S. Treasury yield curve could flatten at an "unthinkable" level next year.

Gundlach, who was referring to a dynamic by which the gap between yields on shorter-dated and long-dated U.S. government debt slims, said that such a narrowing could occur at an unexpectedly low yield level in either 2015 or 2016.

"The message of 2014 has been: As the potential for Fed rate hikes has increased, the long end has done nothing but rally. I think the yield curve is going to flatten at a level previously thought unthinkable," Gundlach told cable television network CNBC.

Gundlach said the Federal Reserve would likely raise interest rates next year, but that U.S. Treasuries were "slightly cheap" at their current levels relative to corporate and municipal bonds and that yields were headed lower.

Gundlach, who correctly predicted that U.S. Treasury yields would fall this year, said in September the benchmark 10-year U.S. Treasury note yield would range between 2.20 percent and 2.80 percent for the remainder of 2014.

He reiterated that he viewed 2.20 percent as a key technical level, and said U.S. Treasury yields would continue to attract demand given their value relative to bonds overseas.

"It seems to me almost unthinkable that U.S. interest rates could rise in any meaningful way against a backdrop of Spanish bond yields being less than 2 percent," he said. "Bond yields are going to drop, I think, because if they can't go up, then they have to go down."

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