Bill Ackman, Pershing Square (hedge fund) manager, revealed on Monday (23 Oct) that he already covered his bet against T-Bond or US 30-year treasury, citing the growing geopolitical risk that may incentivise many to buy safer long-term treasuries as the Israel-Palestine conflict continues.
The billionaire wrote in his post on X that “there’s too much risk” to short long-term bonds and “the economy is slowing faster than recent data suggest”. Previously, he said he is betting the US T-bond to fall as a hedge against persistent 3% long term inflation impact on the stock market. He also wrote that this bet has higher upside gain than the downside risk.
The bond price is inversely correlated to bond yield, as many would sell the current bond holding for the newer higher yield during the rate hike cycle, as the US Fed sharply hiked rate to fight off the inflation in last year. The Fed Chair Jerome Powell still thinks the current inflation is still “too high”, even though the YoY inflation slowed down to 3.70% compared to 9.00% of June last year. Meanwhile, the current Fed rate is between 5.25% to 5.50%.
The near-term futures of T-Bond price (ZBZ23) is currently at 109.28 which is a way below this year’s peak from over 134.00 in April. Meanwhile, the T-bond yield just broke the 5.00% ceiling to over 5.10% last week, although it fell back to 4.99% at noon today (12:00, GMT+7, Bangkok Time), which is a way higher than the year low in April at around 3.54%.
It’s possible that he already won his hedging bet by a lot before deciding to close off this position, as he posted about his short in August and the T-bond yield has risen more than 80 basis points ever since.
