Bill Ackman Pocketed $200Mn in Bets Against US Treasuries. Did He Cash Out at the Right Time?

Billionaire hedge fund manager Bill Ackman made a profit of about $200 million from his bet against US 30-year Treasury bonds, sources told the Financial Times.

The founder of Pershing Square Capital Management wrote in a social media post Monday that he unwound his bet amid rising global risks.

A well-timed market play helped drive the gains. Bond yields were climbing by the time Ackman announced the short bet in August, citing expectations of higher interest rates due to stubborn inflation and the likelihood of more Treasury supply. Then, a massive outflow of buyers sent Treasurys into turmoil soon after.

Ackman's tweets triggered a recovery in Treasury prices. On Monday, the 30-year Treasury yield rose as high as 5.17% before Ackman announced he'd exited his short position and news of the rising death toll in the Israel-Hamas conflict spooked investors, sending the yield back below 5%.

Analysts at UBS Global Wealth Management on Tuesday said Treasury yields are unlikely to rise further, adding to a chorus of investors saying that the selloff in U.S. government bonds is nearing an end.

However, renewed signs of US economic strength suggest that bond yields still have more potential to rise. Sales of newly built homes rose 12.3% in September, supporting concerns that interest rates could remain high for a prolonged period. Weekly jobless claims data today is expected to tick higher.

While further data is expected to support this outlook, the Fed is anticipated to keep rates steady next week, with a possible hike in December. Whether or not Bill Ackman covered, bond yields still likely have more pushing to the upside to go as inflation expectations lead the way higher.