Wagering against Uncle Sam can be a sucker bet.
Just ask Andy Redleaf, the chief executive of Whitebox Advisors, a $2.3 billion hedge fund known for its savvy fixed-income plays.
“We’ve been short Treasurys since sometime in ’09, which has been painful,” Redleaf said.
Still, Redleaf is in good company. Other big hedge funds who are bearish on US government debt include Paul Singer of Elliott Management, Michael Novogratz of Fortress Investment Group and Seth Klarman of Baupost Group.
When Treasury yields hit 3.0 percent in the middle of 2009, the smart money thought they could go no lower, but yields have been sinking just about ever since.
Christopher Sadowski
Some on Wall Street are getting soaked after betting against the US and Lady Liberty — thinking US Treasurys would fall as Washington got swamped under a rising tide of debt.
After the Federal Reserve announced yesterday it would extend its current plan — known as “Operation Twist” — and buy long-term debt, yields bounced around a bit and ended at 1.66 percent.
“When markets are dominated by uneconomic players, it’s difficult to know how long that will last,” said Redleaf, referring to the Fed’s various attempts to keep rates low to jump-start the economy.
Treasurys have also been bolstered by troubles in Europe, as investors flock to them as a safe haven in times of turmoil.
Undaunted by such realities, Singer proposed selling Treasurys as his trade idea at the annual hedge-fund SALT conference in Las Vegas last month. Referring to current Treasury yields, Singer said at SALT, “it’s aberrant. It’s a pricing extreme.”
Singer has long been an inflation hawk and short various government securities. In a letter to investors earlier this year, he criticized the Fed for what he called “radical” monetarism that he thinks will bring “very serious inflation.”
But the nation’s sluggish economic growth, high unemployment and lack of wage hikes should keep overall inflation in check for some time, analysts said.
Hedge-fund managers who are critical of the Fed’s actions think this could change overnight.
Novogratz told Bloomberg, “For your children’s money, you should be short every fixed-income instrument on the planet or at least in the developed world,” including the US. (He acknowledged the trade probably wouldn’t pay off over the next three months.)
Treasury yields sunk to 1.45 percent at the end of May, the lowest in history.
Yet ValueWalk’s Matt Rego suggested that the short Treasury trade could become the new “Japanese widowmaker trade,” referring to the losses incurred betting again Japanese sovereign debt, which has been below 2 percent for more than a decade.
Perhaps the biggest widow was Pimco’s Bill Gross, who was burnt badly last year when he went net short US governments in his $235.9 billion bond fund under the rubric of his “new normal” investing philosphy.
US Treasurys rallied last summer despite the Congressional stalemate over raising the debt ceiling and the subsequent downgrade of the national debt by the credit-rating agencies. Gross reversed that call and has been buying Treasurys ever since.
“This is going to be a short-term phenomenon,” said a hedge-fund investor, referring to low Treasury yields. “But short can mean six years.”
mcelarier@nypost.com
Andy Redleaf, Paul Singer, Treasury yields, Treasury yields, Fortress Investment Group, hedge fund, hedge funds, Michael Novogratz, Treasurys, Treasurys, Redleaf, Treasury, Seth Klarman
Nenhum comentário:
Postar um comentário