The Bond Market Is Cracking, And This 9% Dividend Is Ready For It

BlackRock, the world’s largest asset manager, is turning its back on long-term Treasuries—and that’s rattling the bond market.

That, in turn, has the mainstream crowd turning its back on ALL bonds.

Mainstream crowd turning its back? That’s all we need to hear! In a second, I’ll reveal a 9% “contrarians only” dividend that’s tailor-made for this critical time in Bond-land.

First, let’s break down what the global investment titan is telling us here: In its weekly commentary, released June 2, BlackRock laid things out in stark terms (or at least as stark as a stuffy financial institution gets!):

“Our strongest conviction [bolding mine] has been staying underweight long-term US Treasuries.”

Then the real kick in the teeth: “We prefer the euro area to the US.” Ouch.

BlackRock’s not alone in turning up its nose at long-term government bonds. DoubleLine Capital, led by “Bond God” Jeffrey Gundlach, is turning away, too—especially when it comes to the longest of the long bonds:

“Where we can outright short [30-year Treasuries], we are,” one of the firm’s portfolio managers recently said.

We’re talking about 30-year Treasuries here. Invest for three decades and get your cash back at maturity, with a steady payout kicked your way every year.

Till now, these have been seen as among the safest of the safe investments. Yet as I write this, investors are demanding a near-5% yield to take on the “risk” of owning them!

Bond Panic Is Our Opportunity—in These 9%-Paying Funds

All of this—not to mention weak demand at a recent 20-year government bond auction—has investors fretting over bonds, corporate and government alike.

We, meantime, are targeting select corporate bond closed-end funds (CEFs) like the one we’ll name below, quietly kicking out yields of 9%, 10% and more. Let’s get into why, starting with Uncle Sam.

It’s not hard to see why investors aren’t keen to boost his credit line. The Congressional Budget Office (CBO)—famous for its rose-colored glasses—has already projected a $1.9-trillion deficit for 2025.

This leaves the government with a $40-trillion debt hole, deepening by $2 trillion a year. Congress is also working through the One Big Beautiful Bill Act, which the CBO estimates will add $2.4 trillion to deficits over the next decade. And, of course, Moody’s recently lowered America’s credit rating.

With buyers of government debt thin on the ground, long-term government bond yields are rising (and prices are falling, as yields and prices move in opposite directions). That’s a giant red flag for all bonds, right?

Bessent’s Making Quiet Moves to Curb Rates Now …

While this interpretation isn’t exactly wrong, it focuses too much on the numbers and not enough on the human factor, specifically Treasury Secretary Scott Bessent and Fed Chair Jay Powell—or more specifically, Powell’s likely successor.

Let’s start with Bessent, who has straight-out said he wants to lower the 10-year Treasury rate—pacesetter for consumer and business loans. He’s got plenty of tools at his disposal, including leaning more heavily on short-term debt to fund the government.

That limits the supply of “long” bonds, offsetting future lame auction demand and driving up bond prices (while reducing their yields). This is something Bessent criticized former Treasury Secretary Yellen for doing. But he’s been quietly keeping it up.

Finally, we’ve got an administration fixated on tariffs (which slow growth) and lowering energy prices. It won’t take much extra drilling to pull off the latter—WTI crude is already on the mat, at $63 a barrel as of this writing, on rising OPEC production.

Slower growth + lower oil = lower inflation (and lower rates).

… While the Fed Warms Up in the Bullpen

Then there’s Jay Powell, who, yes, has been holding off on rate cuts. (Jay controls the “short” end of the yield curve, the rate banks charge each other for short-term loans.)

But Jay’s term ends in 11 months, and it’s highly likely the administration will appoint a successor who would work with the government to reduce rates. Lower “short” rates would act as a weight on long rates, helping push bond prices higher.

The Bond God’s Favorite 9% Dividend Is Built for Times Like These

All of this is a prime setup for high-yield corporate debt, which is being shunned along with the federal government’s credit. A top play comes from the Bond God himself: the DoubleLine Yield Opportunities Fund (DLY).

As I write this, DLY yields 9%, and its real strength is its wide mandate—Gundlach is free to invest in any form of high-yield credit, anywhere in the world.

That’s what we want: This bond savant unchained and working for us!

He’s taking a smart approach, too, keeping most of DLY’s portfolio (just under 70%) in high-yield corporate bonds, mortgage-backed securities (which despite the fact that they touched off the 2008 financial crisis are highly regulated today), emerging-market debt and a range of other debt instruments with durations of three years or less.

That’s a prudent setup, as shorter-term bonds still kick out strong yields and won’t be hit as hard as longer-term bonds if rates stay stuck at these levels for a while, or even rise. It also frees up Gundlach to reinvest faster as the rate picture shifts.

Beyond that, since Gundlach can invest across the globe, DLY can benefit as more capital, spooked by Uncle Sam’s bloated budget, hunts for yield abroad.

As I write, DLY trades at a 0.6% discount to net asset value (NAV, or the value of its portfolio) down from a roughly 1.5% premium earlier this spring. The fund also pays that 9% annual dividend with monthly distributions. It has paid special dividends in the past, too.

The bottom line? With Bessent working to bring down rates now, and more help likely from the Fed down the road, we’ve got a flexible setup for income and upside, guided by Gundlach himself. Let’s buy before this discount grows into a healthy premium.

Brett Owens is Chief Investment Strategist for Contrarian Outlook. For more great income ideas, get your free copy his latest special report: How to Live off Huge Monthly Dividends (up to 8.7%) — Practically Forever.

Disclosure: none