Bill Ackman just closed his short position | My Analysis

Bill Ackman closed his short positions on the 30-year treasury yield, stating reasons such as rising geopolitical tensions and too much economic uncertainty. The 30 year yield is now at around 5% range. 

To put things into context, when he shorted the 30 year yield, he said that the 30 year yield could hit 5.5% and the reasoning was that firstly he thinks inflation will not slow down as fast as the market believe. Secondly, government is issuing too much treasury securities to raise money for government spending (supply of bond increases, bond price fall, bond yield rise). Thirdly, the ending of Japan's Yield Curve Control, reducing the demand for US bonds.

Now, after he closed the short position, the bond market actually rebounded, suggesting that bond prices might have hit a low. The reasons he gave also makes quite alot of sense and room of analysis. Firstly, he said that additional geopolitical tension might make stock market or other markets more volatile and unpredictable so investors in general might opt to buy bonds to get a lets say 5% yield every year for 30 years and not have to worry about a thing which will cause demand for bonds to increase and bond price to increase and yield to fall. Secondly, 'the economy is slowing much faster then the economic data suggest' this means that the economy is closer to a recession then we think. and everytime the US economy goes into a recession the treasury yield falls except for in 2020 when the FED printed alot of money to safe the economy, but in today's case, it is very clear that the FED won't ease policy to the extend of 2020. The logic behind a fall in yield during a recession is because investors might buy into bonds during times of uncertainty.

Another factor is Jamie Dimon said during JPMorgan's earnings that 'we are living in the most dangerous time in decades' because of the rising government budget deficit at around $1.7Trillion at time of peace, hence creating further uncertainty because if there is an escalation in geopolitical tension that involve bigger country, the US will need to print more money to finance the war which will cause the financial system to be strained in that case.