GUNDLACH: Interest Rates Will Stay Low 'For As Long As The Eye Can See'

REUTERS/Brendan McDermidJeffrey Gundlach

Jeff Gundlach, the bond fund manager at DoubleLine Funds, was on CNBC's Squawk On The Street to discuss the the recent U.S. budget deal and outlook for interest rates.

CNBC's David Faber opened by asking Gundlach for his opinion of the U.S.'s credit and credibility.

"It slowly keeps eroding in the wrong direction," answered Gundlach.

He noted that the big three ratings agencies - S&P, Moody's, and Fitch - continue to rate the U.S. very favorably. But he also pointed to the recent downgrade by China's Dagong Global Credit Rating Company adding that it reflected "skepticism" by foreign observers.

However, he does not think that this means interest rates will surge in the near-term.

"One thing we know for sure is short-term interest rates will stay low for as long as the eye can see," he said, arguing that the Federal Reserve would have to end its quantitative easing (QE) policy first.

Considering that Vice Chair Janet Yellen is expected to take the helm of the Fed in January when Bernanke retires, Gundlach doesn't see QE ending "for the next few months."

So while Gundlach is bearish on U.S. government policy, he is no bear on the government bond market.