Julian Robertson, founder of Tiger Management, the former hedge fund firm, is protecting himself against the possibility of foreign buyers halting their purchases of U.S. Treasury securities.
Robertson has acquired “curve caps,” which function much like leveraged put options on long-term government bonds, Bloomberg reports.
“They would insure us in the event of massive rate increases,” he said.
Robertson has previously said that if China and Japan stop buying U.S. bonds, the country could experience financial “Armageddon.”
The Treasury Department may need to get new investors by increasing interest rates, he said.
Robertson now only invests his own money in 40 independent hedge funds that he advises in return for a portion of profits.
In January, he predicted that long-term interest rates would increase to a minimum of 7 percent during the next three to five years.
Other investors looking for a safe haven have bought Treasury inflation-protected securities, or TIPS, the Wall Street Journal reports.
During 2009, TIPs funds have records huge levels of investments, including some weeks of reporting over $400 million in sales. Investors also have rushed into commodity funds and gold funds.
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