Jeff Gundlach Warns of Looming Recession as Bond Yields Soar

Bond-market turmoil could be a sign that a recession is on the way, according to renowned investor Jeff Gundlach. Gundlach, founder of DoubleLine Capital, pointed to the narrowing spread between 2-year and 10-year US Treasury yields as a clear indicator of a severe economic downturn.

Gundlach emphasized that the US Treasury yield curve is rapidly de-inverting and urged everyone to be on recession warning rather than just recession watch. He mentioned that even a slight increase in the unemployment rate would trigger a recession alert.

Investors have been increasing their bets on higher longer-term bond yields, anticipating that the Federal Reserve will maintain high interest rates well into 2024 to combat inflation. Consequently, the gap between 2-year and 10-year Treasury yields has narrowed down to the tightest level since late March.

Historically, an inverted yield curve has preceded every US recession since 1969. However, just prior to a recession, the yield curve typically de-inverts. Gundlach’s concerns about the bond market sell-off are echoed by other experts on Wall Street, including David Lebovitz from JPMorgan Asset Management.

Lebovitz also emphasized the potential risks of rapidly rising fixed-income yields, suggesting that a “financial accident” could occur. He predicted that the Federal Reserve will eventually be forced to cut interest rates to prevent chaos in the stock market.

Source: Billionaire investor Jeff Gundlach warns of a recession as markets roil: ‘Buckle up’