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'Bond King' Jeff Gundlach says the Fed may start expanding its balance sheet after injecting $128 billion into markets

'Bond King' Jeff Gundlach says the Fed may start expanding its balance sheet after injecting $128 billion into markets
Reuters / Jessica Rinaldi



Jeffrey Gundlach said that the Federal Reserve may look to expand its balance sheet after a spike in overnight purchase agreements that prompted the Fed to put $128 billion into markets.




Expanding the balance sheet is a baby step towards quantitative easing, Gundlach said, referring to it as "QE lite."




Gundlach has predicted a 75% chance of a US recession before the November 2020 election.




Read more on Markets on Insider.




The Federal Reserve pumped $128 billion into markets in two installments Tuesday and Wednesday to calm a spike in one-day loans backed by Treasury bonds — otherwise known as repurchase agreements.
While the repo move isn't an imminent disaster, it's likely the Fed will use the "warning sign" to begin expanding its balance sheet, Jeff Gundlach, chief investment officer of DoubleLine Capital, said during a webcast on Tuesday.
Expanding the balance sheet is a way of "baby stepping" into quantitative easing, to "try to free up the plumbing of the banking system," Gundlach said. Quantitative easing, or QE, is a way for central banks to inject more money into the overall supply.
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