On Wednesday, billionaire Bill Ackman stated that shorting government bonds is both a hedge against the impact of rising interest rates on the stock market and a solid independent trade. His hedge fund, Pershing Square Capital Management, has already shorted U.S. 30-year Treasury bonds.
Ackman is one of Wall Street's most skilled communicators, having driven transformations at companies such as Chipotle Mexican Grill and Canadian Pacific. His feud with another famed Wall Street investor, Carl Icahn, known as the "Wolf of Wall Street," remains one of the financial market's hot topics.
Ackman tweeted that despite the Federal Reserve hinting at being close to the end of interest rate hikes, the energy transition, defense costs, and workers' stronger wage bargaining power all imply that potential inflationary pressure remains stubborn. Additionally, if the long-term inflation rate in the U.S. stays at 3% instead of 2%, the yield on U.S. 30-year Treasury bonds could rise to 5.5%. As of Wednesday, the yield on U.S. 30-year Treasury bonds had reached a new yearly high of 4.219%.
Ackman is one of the few Wall Street investors who predicted the Covid-19 crisis in advance. His fund secured a profit of $2.6 billion from corresponding hedges as the crisis fully erupted.
Before making the above statements, the credit rating agency Fitch had downgraded the U.S. government's credit rating, although Ackman did not comment on this event.
