Druckenmiller called government bond yields, which have reached multi-year highs, “slightly undervalued”

Amid a global sell-off of government bonds, which has pushed U.S. Treasury yields back to multi-year highs, billionaire and investor Stanley Druckenmiller—a close associate of Fed Chair Kevin Warsh—stated that he believes: the cost of borrowing in the U.S., based on his estimates—taking into account the state of the economy and the massive growth in capital expenditures—remains “slightly undervalued.” He also stated that claims by some representatives of the U.S. central bank regarding the restrictive nature of monetary policy are “absurd,” adding that, in his view, the Fed is no longer “required” to cut rates, according to the Financial Times (FT).

“Given what’s happening in the economy, the capital expenditure boom, and the battle for capital, bond yields seem slightly undervalued, if anything,” Druckenmiller said at a private conference in New York organized by Piper Sandler, which was attended by hundreds of Wall Street investors, among others. A transcript of the meeting was obtained by the Financial Times. Sources confirmed the authenticity of Druckenmiller’s remarks to the newspaper. The rise in government bond yields, the investor noted, “remains gradual and driven by fundamental factors”: “I don’t see anything alarming in this,” he added. “I believe in common sense; you just have to look at asset prices around the world,” Druckenmiller said.

The investor also stated that “Fed committee members who continue to say that the federal funds rate is restrictive are simply ridiculous,” — rate cuts to “soften” the U.S. economy are “no longer necessary,” the investor believes.

Druckenmiller’s comments came amid a sell-off in U.S. Treasury bonds. On September 10, the yield on 30-year Treasuries rose to 5.35%, its highest level since 2007, while the yield on 10-year bonds approached 5%. Yields on short-term securities also rose as investors began to factor in the possibility of a Fed rate hike next week, the Financial Times reports. The rise in yields comes amid inflationary pressures, rising U.S. government debt, and heavy borrowing by AI-related companies, the publication notes.

In August, Druckenmiller had already criticized the Treasury’s expanded bond buyback program, which was intended to calm the debt markets. On September 9, the department announced its decision to increase the purchase of long-term bonds to $6 billion (it was originally supposed to be $2 billion), but this move disappointed many investors—market participants had expected a larger purchase volume.

Investors have long regarded Druckenmiller as one of Wall Street’s most brilliant economic minds, the FT notes. In the 1990s, he worked for George Soros—during the hedge fund manager’s historic bet against the British pound—and later built a fortune at his own family office, Duquesne Capital, where Warsh was a partner before becoming chair of the Federal Reserve.

This article was AI-translated and verified by a human editor