Are Traders Betting on a Big Bond Rally as US Yields Head Back to 4%?
Source: Kapitales Research
Highlights:
Traders have poured into US Treasury options, betting on a bond rally that could push the 10-year yield back to 4%, a level last seen in late November.
At the time of writing, CME data showed open interest in a key March options contract jumping 300% in a week to over 171,000 contracts, with around US$80 million in premiums spent.
Bond market volatility has fallen sharply, with the Bank of America MOVE Index at its lowest level in more than four years, encouraging larger directional bets.
Options Market Signals a Bold Treasury Bet
Traders are making aggressive moves in the US bond market, piling into Treasury options that signal expectations of a near-term rally capable of pushing the US 10-year yield back to 4%, a level not seen since late November. The activity suggests growing conviction that yields may fall despite recent market volatility. At the time of writing, data from CME Group showed heavy buying in a single March-dated options contract linked to the 10-year Treasury. Over the past week alone, open interest in the position surged to 171,153 contracts, marking a 300% increase. Traders have already spent around US$80 million in premium on the trade—an unusually large outlay by historical standards.
Why Traders Are Turning Bullish on Bonds
The positioning comes even as US government bond yields have edged higher in recent weeks. Earlier this month, the 10-year yield briefly touched 4.20% before easing back. At the time of writing, it was trading near 4.16%, with investors digesting fresh economic data and parsing commentary from the Federal Reserve for clues on the pace and timing of future rate cuts. Markets are increasingly weighing the possibility that slowing economic momentum and softer inflation trends could give the Fed room to ease policy further, a scenario that would typically support bond prices and push yields lower.
Low Volatility Adds to the Conviction
Another factor reinforcing the trade is subdued volatility across the Treasury market. The Bank of America MOVE Index, a widely followed gauge of expected bond market swings, has dropped to its lowest level in more than four years. Low volatility often encourages traders to place larger directional bets, given the reduced cost of hedging.
What It Means for Markets
At the time of writing, the surge in options activity suggests that some investors are positioning early for a shift in the interest rate narrative. If yields do retreat toward 4%, it could provide relief for equity markets and rate-sensitive sectors. For now, all eyes are on upcoming economic releases and Fed signals to see whether this bold bond bet pays off.
Disclaimer for Kapitales Research
The materials provided by Kapitales Research, including articles, news, data, reports, opinions, images, charts, and videos ("Content"), are intended for personal, non-commercial use only. The primary goal of this Content is to educate and inform readers. This Content is not meant to offer financial advice, nor does it include any recommendation or opinion that should be relied upon for making financial decisions. Certain Content on this platform may be sponsored or unsponsored, but it does not serve as a solicitation or endorsement to buy, sell, or hold any securities, nor does it encourage any specific investment activities. Kapitales Research is not authorized to provide investment advice, and we strongly advise users to seek guidance from a qualified financial professional, such as a financial advisor or stockbroker, before making any investment choices. Kapitales Research disclaims all liability for any direct, indirect, incidental, or consequential damages arising from the use of the Content, which is provided without any warranties. The opinions expressed by contributors or guests are their own and do not necessarily reflect the views of Kapitales Research. Media such as images or music used on this platform are either owned by Kapitales Research, sourced through paid subscriptions, or believed to be in the public domain. We have made reasonable efforts to credit sources where appropriate. Kapitales Research does not claim ownership of any third-party media unless explicitly stated otherwise.
Customer Notice:
Nextgen Global Services Pty Ltd trading as Kapitales Research (ABN 89 652 632 561) is a Corporate Authorised Representative (CAR No. 1293674) of Enva Australia Pty Ltd (AFSL 424494). The information contained in this website is general information only. Any advice is general advice only. No consideration has been given or will be given to the individual investment objectives, financial situation or needs of any particular person. The decision to invest or trade and the method selected is a personal decision and involves an inherent level of risk, and you must undertake your own investigations and obtain your own advice regarding the suitability of this product for your circumstances. Please be aware that all trading activity is subject to both profit & loss and may not be suitable for you. The past performance of this product is not and should not be taken as an indication of future performance.
Kapitales Research, Level 13, Suite 1A, 465 Victoria Ave, Chatswood, NSW 2067, Australia | 1800 005 780 | info@kapitales.com.au
x
Daily Dose of Buy, Sell & Hold recommendations before the market opens.
Start Your 7 Days Free Trial Now!
We use cookies to help us improve, promote, and protect our services. By continuing to use this site, we assume you consent to this. Read our Privacy Policy and Terms & Conditions
Are Traders Betting on a Big Bond Rally as US Yields Head Back to 4%?
Highlights:
Options Market Signals a Bold Treasury Bet
Traders are making aggressive moves in the US bond market, piling into Treasury options that signal expectations of a near-term rally capable of pushing the US 10-year yield back to 4%, a level not seen since late November. The activity suggests growing conviction that yields may fall despite recent market volatility. At the time of writing, data from CME Group showed heavy buying in a single March-dated options contract linked to the 10-year Treasury. Over the past week alone, open interest in the position surged to 171,153 contracts, marking a 300% increase. Traders have already spent around US$80 million in premium on the trade—an unusually large outlay by historical standards.
Why Traders Are Turning Bullish on Bonds
The positioning comes even as US government bond yields have edged higher in recent weeks. Earlier this month, the 10-year yield briefly touched 4.20% before easing back. At the time of writing, it was trading near 4.16%, with investors digesting fresh economic data and parsing commentary from the Federal Reserve for clues on the pace and timing of future rate cuts. Markets are increasingly weighing the possibility that slowing economic momentum and softer inflation trends could give the Fed room to ease policy further, a scenario that would typically support bond prices and push yields lower.
Low Volatility Adds to the Conviction
Another factor reinforcing the trade is subdued volatility across the Treasury market. The Bank of America MOVE Index, a widely followed gauge of expected bond market swings, has dropped to its lowest level in more than four years. Low volatility often encourages traders to place larger directional bets, given the reduced cost of hedging.
What It Means for Markets
At the time of writing, the surge in options activity suggests that some investors are positioning early for a shift in the interest rate narrative. If yields do retreat toward 4%, it could provide relief for equity markets and rate-sensitive sectors. For now, all eyes are on upcoming economic releases and Fed signals to see whether this bold bond bet pays off.
Disclaimer for Kapitales Research
The materials provided by Kapitales Research, including articles, news, data, reports, opinions, images, charts, and videos ("Content"), are intended for personal, non-commercial use only. The primary goal of this Content is to educate and inform readers. This Content is not meant to offer financial advice, nor does it include any recommendation or opinion that should be relied upon for making financial decisions. Certain Content on this platform may be sponsored or unsponsored, but it does not serve as a solicitation or endorsement to buy, sell, or hold any securities, nor does it encourage any specific investment activities. Kapitales Research is not authorized to provide investment advice, and we strongly advise users to seek guidance from a qualified financial professional, such as a financial advisor or stockbroker, before making any investment choices. Kapitales Research disclaims all liability for any direct, indirect, incidental, or consequential damages arising from the use of the Content, which is provided without any warranties. The opinions expressed by contributors or guests are their own and do not necessarily reflect the views of Kapitales Research. Media such as images or music used on this platform are either owned by Kapitales Research, sourced through paid subscriptions, or believed to be in the public domain. We have made reasonable efforts to credit sources where appropriate. Kapitales Research does not claim ownership of any third-party media unless explicitly stated otherwise.
Customer Notice:
Nextgen Global Services Pty Ltd trading as Kapitales Research (ABN 89 652 632 561) is a Corporate Authorised Representative (CAR No. 1293674) of Enva Australia Pty Ltd (AFSL 424494). The information contained in this website is general information only. Any advice is general advice only. No consideration has been given or will be given to the individual investment objectives, financial situation or needs of any particular person. The decision to invest or trade and the method selected is a personal decision and involves an inherent level of risk, and you must undertake your own investigations and obtain your own advice regarding the suitability of this product for your circumstances. Please be aware that all trading activity is subject to both profit & loss and may not be suitable for you. The past performance of this product is not and should not be taken as an indication of future performance.
Kapitales Research, Level 13, Suite 1A, 465 Victoria Ave, Chatswood, NSW 2067, Australia | 1800 005 780 | info@kapitales.com.au