Kyle Bass, the hedge fund manager who made $500 million in 2007 betting against subprime securities, is now buying shorter-term mortgage-backed bonds and junk corporate debt, expecting that hyperinflation will lead to higher interest rates.

Funds advised by Hayman Advisors LP bought mortgage bonds equal to about 50% of assets, Bass wrote in a letter to investors Oct. 2. The Dallas investment firm also added corporate debt, primarily high-yield loans and bonds, equal to about 25% of assets.

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