Traders in the $27 trillion Treasury market are betting on higher long-term bond yields as Wall Street starts to adjust for Donald Trump’s potential return to the White House.
Investors have been buying shorter-maturity notes and selling longer-term ones after Trump came out ahead of President Joe Biden in the first presidential debate. It’s a wager — known as a steepener trade — that’s been gaining momentum ever since.
Open interest, or the amount of risk held by traders, climbed sharply on Friday and Monday as the gap between the two- and 10-year yields widened. That resulted in about 13 basis points worth of curve steepening, the biggest such two-day move since October.
“It’s still too soon to fully price in an election outcome — but probably not too early to leg into it,” said Subadra Rajappa, head of US rates strategy at Societe Generale SA. “The recent move is a bear steepener and seems to be the…
