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Billionaire Bill Ackman reportedly makes $200M from bet against US Treasuries

Billionaire hedge fund manager Bill Ackman shorted 30-year Treasury bonds in August — a move that netted his fund a profit of about $200 million, people familiar with the matter told the Financial Times.

The founder of New York hedge fund Pershing Square Capital Management said on X on Monday that “there is too much risk in the world to remain short bonds at current long-term rates,” hinting at his exit from the short position.

Ackman — who in 2020 was famously among a small number of investors to call the COVID-19 crisis early and put on a hedge that netted a $2.6 billion windfall — has become known for making hedges to protect the portfolio that end up becoming lucrative.

The yield on the 30-year Treasuries was around 4.16% when he announced his bet against them. He said the Treasury yield, which moves in the opposite direction of prices, could rise to 5.5%.

Ackman’s tweets triggered a recovery in Treasury prices, after an earlier sell-off had pushed yields to 16-year highs, FT reported.

Billionaire hedge fund manager Bill Ackman shorted 30-year Treasury bonds back in August.

“The economy is slowing faster than recent data suggests,” he added in a subsequent post, suggesting that he’s more worried the US economy is headed for a recession than it will be plagued with high interest rates and inflation.

Ackman, whose net worth was pegged by Forbes at $3.5 billion as of Wednesday, made the bet against 30-year bonds using options, people familiar with the matter told FT, which are usually put into practice when hedge fund managers want to limit their financial risk or speculate on price movements.

It cost Ackman some $100 million in premiums to maintain his position, per the outlet, though he made about $300 million from his moves in the market, meaning Pershing Square’s $13 billion flagship fund is in for a $200 million windfall.

The economy is slowing faster than recent data suggests.

— Bill Ackman (@BillAckman) October 23, 2023

Stocks including Chipotle Mexican Grill, Alphabet Inc, Restaurant Brands International, and Canadian Pacific Kansas City Limited make up the bulk of the Pershing Square portfolio, which is mainly set up to benefit from equities moving higher.

To keep long-term Treasury yields higher for longer periods of time, the Federal Reserve would need to keep interest rates higher for longer, which is unlikely if the US economy heads closer to a recession.

Fed officials have held off on hiking interest rates since August, when central bankers advanced rates another 25 basis points to the current 22-year high, between 5.25% and 5.5%.

The yield on the 30-year Treasuries was around 4.16% when Ackman announced his bet against them.

At the latest Fed meeting in September, officials unanimously decided to hold the record-high rate steady for the second time in six policy meetings so far this year in hopes of an economic slowdown.

But thanks to a strong labor market, the US economy has avoided a downturn, and even the Fed has said it’s no longer predicting the economy will slip into a recession by the end of the year.

The conflict between Islamist group Hamas and Israel is unnerving investors and suggests Treasuries could become a safe investment option.

Yields have traded off some to hover around 5.08%.

With Post Wires