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Options trading surged across the U.S. Treasury market as traders positioned for a bond rally that could pull the 10âyear yield back to 4% in the coming weeks, a level that has not appeared since late November, according to data from the CME.
Earlier this month, the 10âyear Treasury peaked near 4.20% before moving within a tight range. Investors spent recent sessions weighing incoming economic readings and reviewing comments from Federal Reserve officials during each of the three rate cuts that have happened this year.
CME figures released Monday showed aggressive buying in a single March options contract tied to the 10âyear Treasury. The total premium paid on that position reached about $80 million, a size rarely seen for one structure. Open interest climbed to 171,153 contracts, reflecting a 300% jump in one week. The rise showed new positions entering the market rather than existing trades being rolled forward.
The wager landed even as yields moved higher on the day. Treasury yields finished Monday around two basis points higher across most maturities, pushing the 10âyear yield to about 4.16%. That move followed a $69 billion auction of twoâyear notes, which drew solid demand and cleared without disruption. The pricing confirmed continued appetite for shortâdated U.S. government debt despite the rise in yields.
Another trade surfaced during the same session. Traders paid a $28 million premium for a separate March options position aimed at a 10âyear yield near 4.05%. The structure sat close to the larger bet and shared the same expiration window. Both trades are set to expire on Feb. 20, after the Federal Reserveâs January policy meeting, allowing traders to express views on changes in rate expectations tied to that decision.
Meanwhile, the 10âyear US Treasury yield, the benchmark for government borrowing, rose 2 basis points to 4.171% by the closing bell on Monday. The 2âyear yield surged by more than 2 basis points to 3.511%, and the 30âyear bond moved up more than one basis point to 4.843%, according to data from CNBC.
For the uninitiated, a basis point equals 0.01%, and yields move in the opposite direction of prices.
The 1âmonth Treasury stood at 3.632%, the 3âmonth yield printed 3.62%, the 6âmonth yield has settled at 3.608%, the 1âyear closed near 3.527%, while the 2âyear finished around 3.507%, and the 30âyear held close to 4.838% by the end of the session.
Market volatility remained muted, with the Bank of America MOVE index dropping to its lowest level in more than four years, signaling calm conditions across the Treasury market.
Meanwhile, the Treasury has scheduled a $69 billion twoâyear note auction on Monday, a $70 billion fiveâyear note sale on Tuesday, and another $44 billion sevenâyear note auction for Wednesday.
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