Bill Ackman: ‘5.5% is appropriate yield for 30-year Treasurys’

Bill Ackman is convinced that long-term Treasury yields could still push a bit further to the upside – possibly to levels last some fifteen years ago.  

Ackman expects inflation to remain high

The billionaire investor is convinced that several factors including elevated energy prices will keep inflation well above the Fed’s 2.0% target especially now that the U.S. autoworkers are on strike for a wage increase.

Government deficit and a weaker foreign demand will continue to weigh on the long-term bonds as well, Ackman added. Expectations of one more rate hike by the end of this year also factored into his forecast.

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.

The 30-year Treasury yield is approaching 4.6% at writing.

Ackman is short on long-term bonds

On X (formerly Twitter) – Ackman also confirmed today that he has turned to swaptions to bet against the long-term bonds.

The world is a structurally different place than it was. The peace dividend is no more. The long-term deflationary effects of outsourcing production to China are no more.

The Founder and Chief Executive of Pershing Square Capital Management is scheduled to speak on September 28^th at the CNBC Delivering Alpha summit.

Earlier this week, the closing watched dot-plot (Fed) hinted at two rate cuts next year versus four it had signalled in June as Invezz reported here after the Bureau of Labour Statistics said consumer prices in the United States were up 0.6% in August versus 0.2% in the prior month.