Billionaire investor William Ackman stated that his hedge fund, Pershing Square Capital Management, has taken a position against U.S. 30-year Treasuries. He sees this as a hedge against the impact of higher long-term rates on stocks and also views it as a promising standalone bet.
Bill Ackman wrote on messaging platform X, formerly known as Twitter, that they are short in size the 30-year Treasury (T) and argued that if long-term inflation is 3% instead of 2%, the 30-year Treasury yield could rise to 5.5%, possibly happening soon. On a recent Wednesday, the yield on the 30-year Treasurys closed at 4.16%, marking the highest close of the year.
Instead of shorting bonds directly, Ackman stated that they implement hedges by purchasing options.
Ackman cited higher defense costs, energy transition, and the increased bargaining power of workers as factors contributing to higher inflation. To address this, the Federal Reserve has been aggressively raising interest rates and indicated the possibility of further actions after already reaching their highest level since 2001.
Bill Ackman, a renowned activist investor on Wall Street, has recently taken to social media to share his thoughts on economic policy and presidential politics. On Wednesday, he expressed optimism about certain macro investments, considering them to offer asymmetric payoffs. In the past, Ackman accurately predicted the COVID-19 crisis and earned significant profits from a hedge he had put on early in 2020.
He emphasizes that the best hedges are those you would invest in regardless of needing protection, which he believes applies to his current viewpoint. While his remarks were made after the U.S. government’s top credit rating was downgraded by Fitch, he didn’t directly address the move in his posting.
Traders quickly responded to the downgrade by seeking safety in government bonds and the dollar, leading to a push out of stocks. As of now, Ackman’s spokesman has not provided further comments on the matter.
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