- Two billionaire “Bond Kings” seem worried that bank failures will trigger a credit crisis.
- Bill Gross warned that soaring interest rates are hurting bank finances and making lending riskier.
- Jeffrey Gundlach pointed out that small business lending has tightened to financial crisis levels.
Bill Gross and Jeffrey Gundlach appear to be bracing for a credit crunch as skyrocketing interest rates and concerns about banks threaten to weigh on lending.
The Fed has raised interest rates from near zero to 4.75% since last March as inflation hit a 40-year high. Gross, co-founder of Pimco and former boss of the flagship total return fund, warned: tweet on tuesday Rate hikes of that speed and magnitude will inevitably hit banks’ finances and increase lending risk.
“Federal Reserve Williams Dismisses Link Between Rate Hikes and Bank Stress!!!!” Gross said New York Fed President John Williams blamed rising interest rates for recession After stating that he did not think so, he wrote: collapse of Silicon Valley Banks and Signing Banks in March.
“Unbelievable,” Gross continued. “A rate hike of 450 basis points and beyond in 12 months will have implications for balance sheets that use appropriate accounting treatments, as well as duration and credit.”
Gross, who shares Gundlach’s nickname of “bond king,” means that rising interest rates are depressing the value of bank bonds and other assets, putting lenders at risk of defaulting on loans. There is a possibility that
Meanwhile, Gundlach said on Tuesday: Tweet Small businesses find access to credit today as costly and difficult as it was in the middle of the financial crisis.
“The NFIB Small Business Credit Index has plummeted (no surprise given the recent bank failures) and is now in the same position as it was in late 2007/early 2008,” said CEO of DoubleLine Capital. rice field.
The two billionaire investors say banks, frightened by the trigger wave that has hit the SVB over the past year and the blow to their bond portfolios, have tightened lending standards in anticipation of further turmoil, offering more interest. It seems that you are worried that you will be charged for
This could lead to a wider credit crunch that weighs on consumers, drains businesses of cash, and undermines the U.S. economy.
Gross and Gundlach recently warned of an impending recession. Gross urged investors to be cautious as he expects a recession soon, while Gundlach warned of a “red alert recession signal” in bond markets.