Ben Bernanke Gave Hedge Fund Managers A Big Trade Hint, And They All Missed It

Ben Bernanke has wasted no time capitalising on his experience as chairman of the Federal Reserve. According to Reuters’ Jonathan Spicer and Svea Herbst-Bayliss, Bernanke has been giving talks and Q&A’s at dinners for the modest fee of $US250,000.

That sounds like a high price. But the hedge fund managers who’ve been to these dinners would disagree.

Here’s an excerpt from Spicer and Herbst-Bayliss’ piece (emphasis added):

At least one guest left a New York restaurant with the impression Bernanke, 60, does not expect the federal funds rate, the Fed’s main benchmark interest rate, to rise back to its long-term average of around 4 per cent in Bernanke’s lifetime, one source who had spoken to the guest said…

…David Tepper, the hedge fund manager who earned $US3.5 billion in 2013 to rank as the industry’s best paid investor, said at an industry conference this week that he attended the first private dinner and peppered Bernanke with questions. But Tepper said he didn’t make the best use of the information, a lapse he now regrets. “I screwed up that trade,” he said.

At the same conference, Novogratz from Fortress said many hedge funds that bet on big interest rate and currency movements missed a hint from Bernanke at the dinner and failed to buy long duration Treasuries

One of the biggest stories in the global financial markets right now is the stunning rally in Treasury notes and bonds, which has been reflected by tumbling interest rates. At the beginning of the year around the time Bernanke retired from the Fed, the 10-year yield was at around 3.0% and Wall Street’s consensus was that it would climb to 3.4% by the end of the year.

Today, the 10-year yield is at 2.52%, which means everyone who bet on bonds has been cleaning up.

That is, anyone who bought into Bernanke’s signal.

Treasury yieldsBloomberg.comThe 10-year yield got as low as 2.47% this week.

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