Billionaire hedge fund manager Bill Ackman believes long-term Treasury yields can soar even higher in the short run due to persistent inflation.
“I wouldn’t be surprised to see 30-year rates surpass the 5% mark, and we may see the 10-year approach 5% as well,” he revealed during an interview at the CNBC Delivering Alpha Investor Summit in New York City.
The CEO of Pershing Square Capital Management expressed skepticism about the Federal Reserve’s ability to bring inflation down to its 2% target, highlighting factors such as a resurgent labor movement and high energy prices.
“From our perspective, we are in a different era,” Ackman commented. “We have a whole generation of people who consider 4% to be a high interest rate. Historically, it’s an unusually low rate of interest.”
The benchmark 10-year Treasury yield hit a 15-year high this week, surpassing 4.65%, after the Federal Reserve signaled it would maintain higher interest rates for a longer period. The 30-year rate is currently trading around 4.71%.
10-year Treasury yield this year
However, Ackman cautioned against investing in the 30-year Treasury bond due to the risk of inflation eroding its returns over such a long period of time.
“Although the economy remains robust with persistent inflation around 3.5% to 4%, we believe that the compensation for entering into a 30-year contract with the government is not sufficient,” Ackman explained.
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