The fund had more than half of its assets in mortgage securities backed by the U.S. government as of July 31. Those bonds behave much like Treasuries in periods of falling rates and have one advantage, said Gundlach.
“They’re immunized from commodity prices,” he said. Falling oil prices are a plus for homeowners, he said, because they make it easier for borrowers to pay back their loans.
Avoiding Commodity Bonds
Gundlach said he has held relatively few commodity and energy bonds. He has avoided emerging market currencies since 2011 on the belief that the U.S. dollar was likely to strengthen.
For Gundlach, all but one of his firm’s eight bond mutual funds are in the top 10 percent of their categories for the year, a period in which rates have both climbed and dropped.
“We’ve had an embarrassment of riches,” he said. “That doesn’t always happen.”