The billionaire investor Stanley Druckenmiller claimed that growing worries about the state of the US economy have led him to purchase two-year Treasury notes in recent weeks.
Long Term Bonds
“I started to get really nervous about two or three weeks ago, so I bought a massive leveraged position in two years,” the Duquesne family office founder stated last week at an investment conference.
Although Druckenmiller claimed he still held a short position in long-term bonds, he stated that overall, for the first time since 2020, he was “long” fixed income, or betting on rising bond prices.
Due to concerns that the economy would be slowing down sooner than expected, billionaire hedge fund manager Bill Ackman, another well-known investor, said last week that he covered a negative bet on US Treasury bonds.
Federal Reserve Cannot Reduce Intrest
Treasury rates on longer terms, which are negatively correlated with prices, have been climbing dramatically lately and this month they reached 5% for the first time since prior to the 2008 financial crisis.
The increase in yields is a reflection of market expectations that the Federal Reserve would not reduce interest rates anytime soon because the US economy has shown itself to be more resilient than many had thought to rising borrowing costs. Concerns over the escalating issuance of government bonds are among the other factors that have led to the bond sell-off.
However, investors and economists have noted that higher long-term yields restrict the availability of credit and could hasten an economic slump.