Billionaire activist investor Bill Ackman believes 30-year interest rates will rise further and, as such, his hedge fund Pershing Square Capital Management will continue to short bonds through swaptions.
In a post on X, formerly Twitter, on Thursday after the Federal Reserve chose to hold interest rates steady, Ackman argued that the world is “a structurally different place,” than it has been previously, pointing to the diminishing deflationary effects of outsourcing to China and rising energy prices.
He also said increased worker and bargaining power will lead to more strikes and wage gains, amid the ongoing Hollywood and United Auto Workers’ strikes.
I believe that long-term rates, e.g, 30-year rates, will rise further from here. As such, we remain short bonds through the ownership of swaptions.
The world is a structurally different place than it was. The peace dividend is no more. The long-term deflationary effects of… https://t.co/0YOPaQuOdR
— Bill Ackman (@BillAckman) September 22, 2023
He is doubtful long-term inflation will return to the Federal Reserve’s 2% target.
“It was arbitrarily set at 2% after the financial crisis in a world very different from the one we live in now,” he said.
“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.”
He added that it wasn’t that long ago that it was thought 5% was a low rate of interest for a long-term, fixed-rate obligation.
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