Bill Ackman remains short bonds and expects long-term rates to rise further amid increasing government debt, higher energy prices and the cost of shifting to green power.
(Bloomberg) — Bill Ackman remains short bonds and expects long-term rates to rise further amid increasing government debt, higher energy prices and the cost of shifting to green power.
“The long-term inflation rate plus the real rate of interest plus term premium suggests that 5.5% is an appropriate yield for 30-year Treasurys,” Ackman, the billionaire founder of Pershing Square Capital Management, posted on X, the social platform formerly known as Twitter.
Yields on the 30-year Treasury bonds climbed one basis point to 4.58% on Friday in Asia trading, adding to the 13 basis point gain on Thursday that took it to the highest since 2011.
Read more: Ackman Says He’s Short 30-Year Treasuries as Supply Ramps Up
With the economy outperforming expectations and infrastructure spending underpinning economic growth and debt supply, expectations for a recession have been moved beyond 2024 and the inflation rate is unlikely to retreat as much as Fed Chair Jerome Powell would like, Ackman added.
“The long-term inflation rate is not going back to 2% no matter how many times Chairman Powell reiterates it as his target,” Ackman posted. “It was arbitrarily set at 2% after the financial crisis in a world very different from the one we live in now.”
Bond investors face a third year of losses after the US central bank once again raised its projections for future borrowing costs. Every benchmark Treasury bond maturity has hit the highest level in more than a decade this week, with the prospects that yields will keep advancing.
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