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Bill Ackman, Pershing Square Capital Management CEO, speaking at the Delivering Alpha conference in NYC on Sept. 28th, 2023.
Adam Jeffery | CNBC
Pershing Square’s Bill Ackman revealed Monday he covered his bet against long-term Treasurys, believing that investors may increasingly buy bonds as a safe haven because of growing geopolitical risks, the latest of which being the Israel-Hamas war.
“There is too much risk in the world to remain short bonds at current long-term rates,” Ackman said in a post on X, formerly known as Twitter, on Monday morning. “We covered our bond short.”
The billionaire hedge fund manager first disclosed his bearish position on 30-year Treasurys in August, betting on elevated yields on the back of “higher levels of long-term inflation.” The 30-year Treasury yield has risen more than 80 basis points since the end of August, making Ackman’s bet profitable.
Bond prices move inversely to yields, so Ackman’s bet against bonds was, in effect, a gamble on higher rates.
The 30-year Treasury yield fell 6 basis points to 5.01% on Monday after Ackman’s comments.
30-year Treasury yield
Bond prices have continued to decline and yields have increased lately, with the benchmark 10-year rate topping the key 5% threshold. The economy and labor market have consistently outperformed expectations, according to recent data, keeping yields elevated.
Ackman has been a vocal supporter of Israel following the Hamas attacks earlier this month, posting frequently about the conflict. Normally, growing global tensions push investors into Treasurys for safety reasons. That’s what occurred during the Russia-Ukraine war, but that has not been the case so far with these latest Middle East tensions.
Economic risk
Ackman also added that he removed the short because of concern about the economy.
“The economy is slowing faster than recent data suggests,” he wrote.
The Fed has raised rates 11 times for a total of 5.25 percentage points, taking the benchmark rate to its highest level in some 22 years. A slowing economy typically leads to lower bond yields.
Fed Chairman Jerome Powell recently said inflation is still too high and lower economic growth is likely needed to bring it down. Data has shown that while inflation remains well above the target rate, the pace of monthly increases has decelerated and the annual rate has slowed to 3.7% from more than 9% in June 2022.
JPMorgan Chase CEO Jamie Dimon recently issued a stern warning about the perils the world faces from multiple threats, saying this may be “the most dangerous time the world has seen in decades.”
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