Jeffrey Gundlach, chief executive of DoubleLine Capital, said on Wednesday that U.S. Treasury bonds look attractive because their yields have moved higher in recent weeks.
"I like bonds now more than a month ago," Gundlach said in a telephone interview.
U.S. two-year note yields hit 0.82 percent on Wednesday, the highest since April 2011. Benchmark 10-year Treasury note yields rose to 2.3 percent on Wednesday, the highest in nearly seven weeks.
Gundlach, whose Los Angeles-based DoubleLine Capital had $76 billion in assets under management as of June 30, also said the junk bond market should be watched closely after the Federal Reserve's interest rate decision on Thursday.
"The market should rally with the Fed not tightening," he said. Gundlach said junk bond prices have been signaling financial stress.
Last year, Gundlach correctly predicted that Treasury yields would fall, not rise as many others had forecast, because inflationary pressures were non-existent and technical factors, including aging demographics, were at play.
Gundlach, who has maintained since May the Fed will not raise rates at all this year, said of tomorrow's meeting: "I think they will have to respect the 32 percent probabilities" the markets are placing on an interest rate increase tomorrow.
"The real question for everyone is: Can the U.S. and global economy function in a reasonable way with so-called normal interest rates? You aren't going to get the answer with zero rates or 25 basis points tomorrow."