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Anthony Scaramucci says he's 'not quite convinced' about the bond market's recession signal

Anthony Scaramucci says he's 'not quite convinced' about the recession

March 31, 2022: -A key signal of recession flashed in the bond market this week, but SkyBridge Capital’s Anthony Scaramucci told CNBC that he would be cautious in predicting a downturn.

On Monday, the U.S. 5-year and 30-year Treasury yields are inverted for the first time since 2006. On Tuesday, the yield spread amid the 2-year and the 10-year rate came close to switching but stayed positive.

Historically, the yield curve has inverted before recessions, indicating investors’ concern about the economy’s health.

“So historically, it would signal that we’re heading into a recession 12 to 18 months, but I will be cautious on that data,” Scaramucci said on CNBC on Wednesday.

When the bond market is healthy, yields are higher for bonds with a longer time to maturity and lower for short-term gains. Investors are expecting a bigger reward for lending their money for a longer time.

But when the opposite occurs, meaning an inverted yield curve, short-term bonds pay a higher yield than long-term ones. That is representing a distortion in the market and suggests bond investors are worried about the economy’s long-term prospects.

Scaramucci is explaining the reason he wouldn’t be too hasty to predict a recession.

“You’ve got two conflicting things happening simultaneously, the ending of the pandemic or the lockdown procedures in most of the world. And you’ve got the uncertainty about a cease-fire in Ukraine and Russia,” the hedge fund founder said.

“And I think that that has to abate before we can look at and analyze the data and determine whether or not it’s consistent with the historical guidance and the indication of recession,” he further said.

But Scaramucci also added that he’s “not quite convinced that there’ll be a recession,” adding that the “economy is booming worldwide.”

“So I want to be cautious, and I’m still very optimistic about the U.S. economy and the overall stock market,” he said.

Increasing inflation, exacerbated by the Russia-Ukraine war, has increased market nervousness over the potential for an economic slowdown.

But analysts expected a strong March employment report Friday to show 460,000 jobs were added.

After a pandemic-induced 3.4% decline in 2020, the U.S. economy last year grew at its fastest pace since 1984.

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