Bill Ackman Earned $200 Million from U.S. Treasury Short Betting

Profited by Betting on Price Decline Until Just Before Government Bond Short Position Liquidation
Earned $2.3 Billion Last Year as Well

Bill Ackman, the hedge fund titan known as the "Little Buffett" and chairman of Pershing Square Capital, reportedly made $200 million (approximately 270 billion KRW) in profits by betting on a decline in U.S. Treasury prices until just before liquidating his short position on U.S. government bonds.

According to major foreign media on the 25th (local time), Ackman generated these investment gains over the past two months by using derivative options that profit from a drop in the price of 30-year U.S. Treasury bonds (i.e., a rise in bond yields). In August, Ackman stated, "U.S. long-term Treasuries are overbought," adding, "With high inflation, the Fed is likely to continue raising interest rates, causing bond prices to fall and yields to rise." He also anticipated that the U.S. government's large deficits would increase Treasury supply, further pushing prices down.

Since then, U.S. Treasury yields have continued to rise. The Federal Reserve (Fed) signaled a prolonged period of high interest rates, causing yields to surge rapidly from late August to their highest levels since 2007. When Ackman claimed in August that long-term Treasuries were overbought, the 30-year U.S. Treasury yield was about 4.3%. By the 23rd of this month, roughly two months later, it had climbed to 5.18%. This represents a nearly 0.9 percentage point increase in just two months. Although the 30-year Treasury yield slightly declined to around 5.09% as of this date, it remains at a high level.

Since Treasury prices move inversely to bond yields, Ackman was able to leverage fluctuations in Treasury yields over the past three months to generate substantial profits. He reportedly earned $300 million recently but spent $100 million on risk premiums, resulting in a total profit of $200 million. The company stated that this significantly contributed to the flagship Pershing Square fund, which manages $13 billion and recorded an 11.6% return as of the 17th.

Last year, Ackman also profited $2.3 billion (approximately 3.12 trillion KRW) by betting on a decline in Treasury prices. In December 2021, he focused his bets on rising yields and falling prices of 2-year U.S. Treasuries.

However, Ackman recently liquidated his short position on U.S. Treasuries after about two months, anticipating that Treasury yields would fall due to a rapid slowdown in the U.S. economy. On the 24th, he posted on social media platform X (formerly Twitter), stating, "The economy is slowing faster than recent data suggests," and added, "I have closed out all my short bond positions," indicating his expectation of declining yields going forward.