2023-11-02 03:00:11
After the U.S. Federal Reserve (Fed) announced on Wednesday (1st) that interest rates would remain unchanged, Jeffrey Gundlach, nicknamed the “New Bond King”, believed that as the U.S. economy further deteriorates and will initially enter recession in 2024, U.S. interest rates are regarding to go lower.
“What the market is going to face is that we can no longer keep interest rates and deficits at current levels,” the DoubleLine CEO told CNBC.
The Fed decided on Wednesday to suspend interest rate increases for the second consecutive time, keeping the benchmark interest rate at 5.25-5.50% while retaining the option of raising interest rates in the future. However, Chairman Ball also admitted at the press conference that the financial situation has tightened significantly in recent months, driven by factors such as rising long-term bond yields.
Gundlach explained that if the economy weakens, the Fed may cut interest rates by 200 basis points (8 yards) to 2.5% by early next summer, rather than just 50 basis points (2 yards), and warned that interest payments may trigger The next wave of “financial crisis”.
He pointed out several signs of recession. The first is that although the unemployment rate is still low, it is gradually rising.Secondly, the 2-year and 10-Year Treasury Bond YieldThe curve has been inverted for more than a year and has recently become steeper, signaling a recession.
He believes that there has already been an initial wave of layoffs. “I believe corporate layoffs are coming. We’ve already seen workforce freezes and now we’re starting to hear layoff announcements. Financial institutions and tech companies, and I think it’s going to spread.”
Gundlach expressed a preference for Treasury bills over cash at the moment and predicted 10-Year Treasury Bond YieldIt may remain at the same level until the end of next year.
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