Bryan Bedder
Hedge fund manager Bill Ackman reportedly made $200M in profit from wager against 30-year U.S. Treasury bonds (US30Y), a position he said he closed earlier this week.
He first announced his short position in August. Ackman, the founder of Pershing Square Capital Management and Pershing Square Holdings (OTCPK:PSHZF), took the stance against 30-year bonds using options, derivatives that allow traders to profit from a move in prices without having to borrow and sell the underlying bonds, the Financial Times reported, citing people familiar with the matter.
In gross terms, Ackman made $300M from the drop in bond prices, but he paid out almost $100M in premiums for maintaining the position, the FT said.
When he disclosed his bet against the bonds, 30-year Treasuries were yielding ~4.3%. On Monday, they touched a high of 5.18% and recently stood at 5.08%.
In August, Ackman predicted that the 30-year yield could reach 5.5%, if long-term inflation ran at 3% instead of 2%. In addition, government bond prices were poised to fall (which means higher yields) as the U.S. Treasury increased the size of its longer-term debt sales, increasing the supply. Meanwhile, the Federal Reserve, in quantitative tightening mode, is no longer buying government bonds for its balance sheet.