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David Tepper: 'You bet your heinie' I'm short bonds

Following a sharp run-up in bond yields since the summer, hedge fund manager David Tepper told CNBC he thinks prices still have room to drop.

Asked whether he is short bonds, the Appaloosa Management founder replied: "You bet your heinie."

The benchmark U.S. 10-year Treasury note yield has risen sharply after hitting a 52-week low in July of 1.36 percent. It has since rebounded to trade above 2.55 percent amid stronger economy data and expectations of higher inflation and tighter U.S. monetary policy.

Yields increase as bond prices fall.

While yields have risen sharply, Tepper said Wednesday, "We've got a lot of room until we have to worry."

On a multiple basis, Tepper described the overall equity market as "kind of full," but stressed that "every region around the world is growing."

"Listen, I don't think the market is cheap by any stretch of a multiple," he said in the interview on "Squawk Box."

But amid a backdrop of improving global economic conditions and continued easing from the European Central Bank and the Bank of Japan and a still-low federal funds rate, Tepper said: "You can't be short in that kind of setup. I'm not suggesting the market is really cheap, but listen, it's hard to go short when you still have the, you would say, drugs being given. I think that's what you would say. The punch bowl is still full."