According to a source familiar with the transaction, billionaire hedge fund manager Bill Ackman, who typically invests in equities, made almost $200 million on a wager on US 30-year Treasury bonds on Wednesday.
Monday, on X, Ackman stated, “We covered our bond short,” which was around a month and a half after he made the wager public on the defunct Twitter messaging app.
“The economy is slowing faster than recent data suggests,” Ackman said in the article, adding, “There is too much risk in the world to remain short bonds at current long-term rates.”
News of the increase was originally published by The Financial Times.
Most of the securities in the Pershing Square portfolio come from companies like Chipotle Mexican Grill, Alphabet Inc., Restaurant Brands International, and Canadian Pacific Kansas City Limited. The portfolio is primarily designed to profit from higher-performing stocks. Ackman does, however, occasionally use hedges to safeguard the portfolio.
In August, Ackman suggested that labor’s increasing negotiating power, energy shortages, rising defence expenditure, and the shift to green energy would keep inflationary pressures strong even while prices were slightly reducing. “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,” he stated to his shareholders.
At the time of his announcement of his wager against the 30-year Treasuries, the yield was around 4.16%. He predicted that the Treasury yield, which swings against the direction of the market, may reach 5.5%.
However, investors are becoming uneasy due to the war between Israel and the Islamist party Hamas, which implies Treasuries may turn into a secure investment alternative. After a little decline, yields currently stand at 5.08%.
Ackman was one of the few investors in 2020 to predict the COVID-19 issue ahead of time and to invest in a hedge that brought in $2.6 billion for his fund at the beginning of the year.