Bond investor Jeffrey Gundlach said the Federal Reserve will take the disruption in short-term money markets as a warning sign.
Gundlach, the chief executive of DoubleLine, on his webcast to investors talked about the disruption that led to the New York Fed to announcing it will carry a second overnight repo operation on Wednesday ($75 billion in repos), after Tuesday’s $53 billion funding.
“The freeze-up can only be viewed as a negative,” Gundlach said, according to CNBC. “They are baby-stepping their way to doing QE.”
The Fed only recently wound up its quantitative tightening program. The central bank is expected on Wednesday to cut interest rates by another quarter point.
Bond yields fell ahead of the decision, with the benchmark 10-year yield TMUBMUSD10Y, -1.45% falling 4 basis points, and the 30-year yield TMUBMUSD30Y, -0.98% also falling 4 basis points.
Also read: Wall Street raises questions about Fed’s action on funding squeeze