Thread by @DLineCap

With regional banks on their back foot, yield curve suggesting imminent recession and a Fed facing both a fragilized financial system and inflation, DoubleLine CEO Jeffrey Gundlach shares his views with @ScottWapnerCNBC 12 pm PT/3 pm ET today on CNBC.

#rates #banks #Powell

https://twitter.com/CNBCClosingBell/status/1635320310387064833

Gundlach: All of us have experienced nothing but systematically declining interest rates over the last 40 years. We all think we know things based on our past experience. But we've no experience for a climate of rapidly rising interest rates.

Jeffrey Gundlach: This regional bank crisis may portend problems down in the riskier areas of credit, including high yield corporate bonds.

These companies may experience trouble refinancing and rolling over their debt.

Gundlach: CCC rate bank loans is another area to watch.

Jeffrey Gundlach: The speed and abandon with which the response came to the regional banks.

.@DLineCap CEO Jeffrey Gundlach: The Fed is accepting bonds that are worth as low as 55 cents on the dollar. 

The only to back stop these securities is to print money.

Result: fuel for inflation.

Gundlach: Imminent recession increasingly likely.

Gundlach: We were at peak inversion last week on the yield curve.

With de-inversion beginning, that signals approaching recession.

Mr. Gundlach: Backstopping the regional banks is an inflationary policy.

Gundlach: This is really throwing a wrench in Jay Powell's game plan.

Gundlach: The inflation fight is temporarily being abandoned.

Jeffrey Gundlach: March 22 the Fed will probably just raise 25 basis points. Things are happening so quickly the Fed is not going to go 50.

Gundlach: To save the program and their credibility, they probably raise 25 basis points.

Gundlach: We'll see what the inflation numbers look like this week, if they're even relevant in the present context.

Gundlach: It will be proof positive that the Fed follows the 2-year if the FOMC doesn't raise rates March 22.

.@DlineCap CEO Jeffrey Gundlach: If the Fed doesn't raise rates next week, we should shutter the Fed and replace it with the yield on the two-year Treasury.

Gundlach: It's so fascinating that officials didn't see this coming. Whenever you have a huge pricing of one of the world's largest markets, in this case the Treasury market, the world discovers somebody has swimming out in the ocean without a bathing suit.

Gundlach: You can't bail out every carry trade.

Gundlach: This time we might have to bail out the Federal Reserve.

Gundlach: The ultimate problem: we are going to have deal with America's unfunded liabilities.

.@DLineCap CEO Jeffrey Gundlach: Avoid lower tiered credit, especially floating rate, like the plague.

Gundlach: I have not changed my game plan: barbell of long-term Treasuries to offset the credit risk one takes to get yield.

That's working very well.

I've been moving up in credit the last 18 months.