Long-dated government bonds are going through a rough patch. Just in the past week or so:
Q2 2023 hedge fund letters, conferences and more
- The Bank of Japan tweaked its yield curve control policy (adding to worries that Japanese money could leave international markets and return home).
- The US Treasury upsized its quarterly bond sales (raising concern that supply would swamp demand).
- The ADP Research Institute’s payrolls report surprised to the upside (suggesting to some that the US labor market was running too hot to tame inflation and that the Federal Reserve might take interest rates higher to rein it in).
- And Fitch Ratings downgraded the US from AAA to AA+ (a move that meant two-thirds of the main rating companies now view the nation as a less-than-sterling credit, although — for a variety of reasons — the conventional wisdom is that this last factor probably moved markets less than the others).
The upshot is that yields on 30-year Treasuries jumped about 29 basis points since Monday and were poised to test their 12-year highs set last October.
Enter Bill Ackman, the hedge fund investor turned social media provocateur, who knows how to seize upon a news cycle for maximum attention and impact. Just as yields were rocketing higher, the Pershing Square Capital Management founder posted on X — the platform formerly known as Twitter that he invested in as part of Elon Musk’s leveraged buyout — that he was using the options market to make what was effectively a short bet on long-dated US bonds.
Read the full article here by Jonathan Levin, Advisor Perspectives.
