Billionaire hedge fund manager Bill Ackman, renowned for his stock investments, recently made approximately $200 million by betting against U.S. 30-year Treasury bonds, according to a source familiar with the trade. Ackman’s decision to cover his bond short position came about 12 weeks after he initially revealed the bet on the X platform, formerly known as Twitter.
In a recent post on X, Ackman explained his move, stating, “The economy is slowing faster than recent data suggests.” He added, “There is too much risk in the world to remain short bonds at current long-term rates.”
Ackman’s Pershing Square portfolio primarily consists of stocks from companies like Chipotle Mexican Grill, Alphabet Inc, Restaurant Brands International, and Canadian Pacific Kansas City Limited. This portfolio is primarily structured to benefit from upward movements in equities. However, Ackman occasionally employs hedges to safeguard the portfolio.
Even as prices showed some moderation, Ackman argued in August that factors such as increased defense spending, energy scarcity, the transition to green energy, and heightened labor bargaining power would sustain inflationary pressures. He emphasized, “We continue to hedge the risk of a rise in 30-year Treasury rates because we remain concerned about the risk of higher long-term interest rates on equity valuations.”
When Ackman initiated his bet against 30-year Treasuries, the yield was approximately 4.16%. He suggested that the Treasury yield, which moves inversely to prices, could potentially rise to 5.5%.
However, the ongoing conflict between the Islamist group Hamas and Israel has created uncertainty among investors, leading some to consider Treasuries as a safe investment option. Consequently, yields have slightly eased, hovering around 5.08%.
It’s worth noting that in 2020, Ackman was among the few investors who accurately predicted the COVID-19 crisis and implemented a hedge that yielded his fund approximately $2.6 billion early in the year.
