One of the most prominent bond bears on Wall Street has decided to walk away with his gains, declaring that Treasury yields are likely poised for a turnaround following an ascent that rattled global markets.
Pershing Square’s Bill Ackman said Monday that he has closed his bet against 30-year Treasury bonds, saying in a series of posts on X, the social-media platform formerly known as Twitter, that “there’s too much risk in the world to remain short bonds at current long-term rates.”
“We covered our bond short,” Ackman declared in a pithy post early Monday.
He also said the “economy is slowing faster than recent data suggests,” which also helped inspire his change of heart.
Typically, bonds rally when the economy slows as investors opt for the safety of fixed cash flows over the risk of holding stocks.
Ackman revealed in early August that his firm was shorting 30-year Treasury bonds due to projections for exploding U.S. budget deficits and the expectation that a number of factors would keep inflation well above the Federal Reserve’s 2% target. The hedge-fund chief said he wouldn’t be surprised to see the 30-year yield climb to 5.5% in the not-too-distant future.
See: ‘We are short in size’: Bill Ackman bets against 30-year Treasury bonds after Fitch downgrade
Late last month, Ackman said during an interview at CNBC’s Delivering Alpha conference that the yield on the 10-year note could advance past 5% “in a hurry,” a call that proved prescient as the yield topped 5% briefly on Monday for the first time since 2007.
See: Bill Ackman says Treasury yields are going higher in a hurry, and that investors should shun U.S. government debt
Since then, yields have eased off their session highs, with the 10-year Treasury note
BX:TMUBMUSD10Y
down 1.3 basis points at 4.910%. The yield on the 30-year bond
BX:TMUBMUSD30Y,
meanwhile, was down 4.9 basis points at 5.032%. Some have speculated that Ackman’s post may have helped support bond prices, which move inversely to yields. They moved lower on Monday just after his first tweet landed at 9:45 a.m. Eastern Time.
Treasury yields have been climbing for months, driven by a host of factors including investors demanding a higher term premium to compensate for uncertainty about U.S. fiscal and monetary policy, among other factors.
Last week, Federal Reserve Chair Jerome Powell dismissed the notion that inflation expectations are driving yields higher, saying instead during a talk at the Economic Club of New York that a rising term premium has been the primary culprit. Investors have blamed rising bond yields for rattling U.S. stocks, which have been sliding since early August.
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