DLY: Top Bond Pick in Falling Rate Market
- Interest rates are expected to decline, perhaps boosting bond values, including those held by the DoubleLine income Solutions Fund (DLY).This fund offers an attractive 8.7% yield.
- Forget the Federal Reserve's stance, treasury Secretary Scott Bessent is now a key player influencing the 10-year Treasury yield, a benchmark for consumer and business loans.
- Bessent is tasked with refinancing $7 trillion in public debt within a year.
Bessent’s Strategy: How to Profit From Lower Bond Yields With DLY
Updated June 01, 2025
Interest rates are expected to decline, perhaps boosting bond values, including those held by the DoubleLine income Solutions Fund (DLY).This fund offers an attractive 8.7% yield.
Forget the Federal Reserve’s stance, treasury Secretary Scott Bessent is now a key player influencing the 10-year Treasury yield, a benchmark for consumer and business loans. Bessent’s focus is on lowering this rate.
Bessent is tasked with refinancing $7 trillion in public debt within a year. Issuing traditional long-term bonds would likely increase long-term yields,so his aim is to lower the 10-year rate.
“The president wants lower rates,” Bessent said in a February Fox News interview. “He and I are focused on the 10-year Treasury and what is the yield of that.”
Bessent’s strategy to reduce the 10-year yield involves several key elements:
- Tariffs: These are seen as a drag on economic growth, thus not inflationary.
- Drilling: Increased drilling aims to lower energy costs.
- Deregulation: This is intended to reduce business costs and boost productivity.
The DoubleLine Income Solutions Fund (DLY) is managed by Jeffrey Gundlach, known as the “Bond God,” who has a track record of triumphant contrarian investment calls. Gundlach predicted the 2008 financial crisis, Trump’s 2016 election victory and the 2022 market panic.
DLY invests primarily in below-investment-grade bonds, seeking higher yields and greater upside compared to traditional Treasuries. These bonds represent undervalued opportunities, notably as interest rates decline.
As its launch in 2020, DLY has consistently provided monthly payouts to shareholders and issued special dividends at the end of 2023 and 2024.
With an average duration of 5.8 years, DLY’s bonds are positioned to maintain high yields. The fund also uses leverage, indicating confidence in declining rates and reduced borrowing costs.
What’s next
Beyond bonds,other assets like REITs and utilities may also benefit as Bessent focuses on lowering Treasury rates. Investors can tap into these opportunities through CEFs offering attractive monthly dividends.