DoubleLine Funds' Jeffrey Gundlach warns that we may be on the edge of a big bond market rally that could see yields tanking.

"If we go down [more] on Treasury yields, we will see one of the biggest short-covering scrambles of all time," said Gundlach on Wednesday in San Diego. This quote is being reported by FA Mag's Dan Jamieson from the Altegris Investments strategic investment conference.

Coming into 2014, almost no one predicted the 10-year Treasury yield would tumble to the levels we're seeing today.

But bond fund manager Jeff Gundlach did.

During a public webcast on Jan. 14, when the 10-year yield was at around 3.0% and Wall Street said it would climb to 3.4%, Gundlach predicted that it could fall as low as 2.5% in the near-term.

Today, the 10-year yield fell through 2.5% and got as low as 2.4716%.

Gundlach isn't the only one warning of a short squeeze in the bond market.

"10y short interest futures (CFTC) data showing a very crowded short," said Stifel Nicolaus' Dave Lutz. "The crowd is rarely right, and now the squeeze is on."

Should things intensify, Gundlach's already contrarian prediction may not have been contrarian enough.

"If for some reason someone has to cover these shorts, you could actually see the low yields of 2012 get taken out," said Gundlach.

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