Jeffrey Gundlach sees falling yields ahead as the central banks reach a trough in the liquidity cycle.
The size of Fed funds rate hikes is declining from 75 basis points hike to 50 basis points to its latest, February, 25 basis points, which is a clear indication that Fed tightening has peaked.


“Jeffrey Gundlach sees falling yields ahead as the central banks reach a trough in the liquidity cycle”
WEALTH TRAINING COMPANY
A battery of corporate layoffs, a string of negative economic indicators, and fears of another crisis in the bond market may have convinced the Fed that tightening pains are over.
The Feds demand-crushing rate hikes have financially engineered a recession, crashed household consumption, and inflation for discretionary items. So we could be nearing the end of this tightening cycle, which popped the asset bubble of everything and wiped trillions of dollars off investors’ portfolios. The great pivot begins with a reduction in rate hikes, then a pause, and finally rate cuts.
“Here is the yield change in the UST market over the past 3 months: Two Year: Down 54 bp Five Year: Down 83 bp Ten Year: Down. 71 bp Thirty Year: Down 59 bp Fed Funds: Up 75 bp Message seems clear,” tweeted Jeffrey Gundlach today, Feb. 2023

“The Feds demand-crushing rate hikes have financially engineered a recession”
WEALTH TRAINING COMPANY
The 2 Year Treasury Rate is a guide for where Fed fund rates are heading
So with the 2 Year Treasury Rate yield falling to 4.21%, the bond market is telling investors that Fed fund rates have almost peaked.
2 Year Treasury yields peaked in November at 4.72% and are flattening out as the official inflation rate declines.
“Trillions of dollars were wiped off portfolios, massive layoffs in tech and finance” – Wealth Training Company
Jeffrey Gundlach sees falling yields which is bullish for the economy and risk assets
Lower Fed fund rates and treasury yields reduce the burden of servicing debt for businesses, the government and households. The 10-year treasury note is used as a yardstick for setting interest rate payments on business loans, mortgages, and auto loans.
Signs of severe stress in the auto loans market as a growing number of US households were unable to make payments on their auto loans due to the spiraling cost of servicing debt.
The last time the Repo man was so busy was in 2008, which is a clear indication the economy is under extreme stress.
Trillions of dollars were wiped off portfolios, massive layoffs in tech and finance, and young people losing their cars and soon homes might be enough to get the great pivot started.
This may very well be the beginning of the end of the Fed tightening cycle, which would come in the second half of the US presidential cycle.
Think about it. No sitting president wants the electorate to go to the polls in a recession.
“It’s the economy, stupid,” was a strategy in Bill Clinton’s successful 1992 presidential campaign against incumbent George H. W. Bush.