Wall Street legend Stanley Druckenmiller told a closed-door gathering in New York on Thursday that US borrowing costs are 鈥渆ven a bit low,鈥 calling Fed officials who still describe monetary policy as restrictive 鈥渃ompletely laughable,鈥 and stating plainly that rate cuts are 鈥渏ust not necessary anymore. His remarks came as the 30-year Treasury yield briefly climbed to 5.35%, its highest level since 2007.

Druckenmiller shared these views before several hundred investors at a Piper Sandler event in New York. The Financial Times reviewed meeting transcripts and confirmed his comments through multiple informed sources. 鈥淭hose members of the Fed board who keep saying the federal funds rate is restrictive are absolutely laughable,鈥 he said. Determining whether borrowing costs are excessive doesn鈥檛 require elaborate reasoning, he argued. 鈥淚 believe in common sense, you just have to look at asset prices around the world.鈥

As a close friend of Fed Chair Warsh and a long-time mentor to both Treasury Secretary Bessent and Warsh, Druckenmiller鈥檚 views on monetary policy draw outsized market attention. He revealed that he is no longer permitted to speak with Warsh, yet still counts him among his 鈥渃losest friends鈥 and calls him an 鈥渆xcellent Fed chair.鈥

Bond Yields Are Rising, Yet He Still Sees Them as Not High Enough

Druckenmiller鈥檚 comments arrive amid an ongoing selloff in US Treasuries. Inflationary shocks from Trump鈥檚 war in Iran, the swelling US public debt load, and heavy borrowing by AI companies have all weighed on the bond market. On Thursday, the 30-year yield rose as much as 6 basis points to 5.35%, the highest since 2007, while the 10-year yield approached 5%. Short-dated yields also moved higher as markets began pricing in the possibility of a Fed rate hike next week.

Bessent earlier expanded the US Treasury buyback program in an attempt to support the bond market. The initiative kicked off this week with a maximum single-operation size of $6 billion, though actual purchases came in below that cap, and yields have kept climbing. Druckenmiller has already criticized Bessent鈥檚 approach in a Wall Street Journal commentary last month. Yet in his view, the current rise in yields still does not warrant concern.

鈥淕iven what鈥檚 happening in the economy, the capital expenditure boom, and the war for capital, bond yields actually look a little low,鈥 he said. Druckenmiller sees the yield increase as a slow, fundamentally-driven process, 鈥渂ut I don鈥檛 find it worrying in the least.鈥

The macro hedge fund manager has long been regarded as one of Wall Street鈥檚 most closely watched economic thinkers. During the 1990s, he worked for George Soros and participated in the historic short against the British pound, later amassing a vast fortune through his family office, Duquesne Capital. Warsh served as a partner at Duquesne before being confirmed as Fed Chair earlier this year. Duquesne also stands as an early-stage investor in AI companies.

AI Bets Survive, but Position Size Has Been Slashed to 20% of Six Months Ago

Druckenmiller鈥檚 stance on the AI sector has also shifted. He said his understanding of AI technology largely comes from younger analysts at his firm who are 鈥渆mbedded in the networks of kids in AI research labs.鈥 A substantial portion of Duquesne鈥檚 recent profits has come from AI wagers rather than traditional macro trades in currencies or bonds. But despite his bullishness on AI, the firm has dramatically cut its exposure to the sector.

Druckenmiller indicated that current investment in AI is now only 20% of what it was six months ago. 鈥淭he whole AI thing has been an incredible journey,鈥 he said. 鈥淚 think we鈥檙e in the late stages of the buildout, and people are going to have to start worrying a little bit.鈥 He is especially wary of the prevailing view that strong corporate earnings mean stocks can keep rising indefinitely. 鈥淲e could very well be in an earnings bubble, because this AI buildout will eventually come to an end, and frankly, banks are also doing AI trades,鈥 he said.

Druckenmiller elaborated further: 鈥淚 mean, when these guys take their companies public, they make hundreds of millions of dollars.鈥 Even so, he has no interest in shorting the US dollar. He noted that America holds a vast global advantage in AI development, while Europe has achieved 鈥渘othing at all鈥 in this area. By comparison, he has been short the euro and the British pound since the start of this year. He did stress, however, that these positions are far smaller than his historical currency bets, where his exposure sometimes reached twice his net worth in certain trades.