Gundlach Says Recession Will Start in a Few Months

The rate on the maturity surged 25 basis points on Monday as investor sentiment improved, but it’s still down about 100 basis points from earlier this month.

If the Fed raises rates again in May, Gundlach said the difference “between what you can get on T-bills and what you can get in the banking system will grow.”

He warned that such a scenario would “counter-productively cause great shrinkage of liquidity in the banking system, maybe some more problems with unrealized losses,” he said.

Smaller banks in particular have been shedding deposits in recent weeks as customers shifted funds to larger institutions after the collapse of several U.S. lenders.

But banks broadly have been fighting for deposits as the Fed’s rate hikes have spurred investors to shift cash to higher-yielding products, like Treasury bills and money-market funds.

(Photo: Jim Lee/Bloomberg)