David Tepper is bearish on bonds, especially the 2-year Treasury, amid rare coordinated tightening by central banks around the globe. “I’m going to lean short. I’ll be short on bonds,” said the founder of Appaloosa Management in an interview with CNBC’s ” Squawk Box ” on Thursday. “I can’t love the 2-year here.” The 2-year Treasury yield has spiked since the Federal Reserve began hiking interest rates and is currently 4.24%, higher than the 10-year . Yields and prices move in opposite directions. The Fed, which boosted rates by another 50 basis points last week, has said it will continue hiking through next year, with no reductions until 2024. Based on the fed futures, traders are expecting the central bank will continue to raise rates at least a quarter point in February and again in March. Meanwhile, the European Central Bank has also indicated it sees significant rate increases ahead and Bank of England officials have signaled the possibility of more rate increases in the future. Tepper said he believes that one must take central banks at their word, which means a lot more tightening ahead. If officials say they are going to keep raising rates that means the 2-year yield is headed higher and therefore prices are headed lower — so it makes sense to hold out longer for a better yield. “When they tell me they are going to go higher and stay high, how do I like [bonds] when I don’t like the short end of the curve and I don’t know how it feeds into the long end of the curve at some point,” Tepper said. “It makes it kind of a very tough competition for other assets.” He also said he is “leaning short” on equities .
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