‘Too much risk in the world’: Billionaire investor Bill Ackman covers bearish bet against Treasuries

Billionaire hedge fund manager Bill Ackman has covered his bet against long-term Treasuries, believing that bond yields will fall amid the growing geopolitics risks over the Israel-Hamas war. The chief executive officer (CEO) of Pershing Square Capital Management took to microblogging website ‘X’ and revealed that he has covered his short bonds as there is too much risk in the world to remain short bonds at current long-term rates. 

After Ackman's comments on Monday, October 23, the 30-year Treasury yield dropped 6 basis points to 5.01 per cent, in volatile trade. Ackman first revealed his bearish position against long-term Treasuries in August, when he was betting against elevated yields on the back of higher levels of long-term inflation.

Also, the benchmark US 10-year US Treasury bond yields rose above the 5 per cent -mark for the first time since 2007 on Monday, touching its 16-year high level after the Federal Reserve reiterated its hawkish stance to anticipate more rate hikes this year.

While the benchmark yield eased back from that level, it posted its largest weekly surge since April 2022, powered by strong economic data. Bond yields surged by almost 30 basis points last week.

Also Read: US inflation still high, warrants slower economic growth, more rate hikes to achieve 2% target: Fed Chair Powell

Economic Concerns

The leading hedge fund manager also added that he removed the short because of concerns of a slowing economy. “The economy is slowing faster than recent data suggests,” he wrote on ‘X’.

The US Federal Reserve announced its last interest rate decision on September 21, after a two-day Federal Open Market Committee (FOMC) meeting and left the benchmark interest rates unchanged at 5.25 per cent - 5.50 per cent.

Last month, Fed officials predicted that they would impose one more interest rate hike before the end of the year, on top of a series of 11 rate increases that have lifted their key rate to about 5.4 per cent, its highest level in 22 years.

Powell underscored lingering theme at the US central bank and explained that despite a steady progress on lowering inflation, the battle in US is not over and further rate hikes are still a possibility with the duration of tight monetary conditions yet to be determined.

In his remarks, Powell echoed other Fed officials in suggesting that the US economy is at a turning point: If growth remains as healthy as it has been since this summer, additional rate hikes could be needed. But any sign of weaker growth or hiring could help slow inflation and allow the Fed to keep rates unchanged.

Recently, JPMorgan Chase CEO Jamie Dimon also 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.”