Lates News

Optimistic expectations for a peace agreement in the Middle East and the drop in oil prices are prompting bond traders to start positioning for a rise in US Treasury bonds, which could push the 10-year Treasury yield towards 4%. A large position in the options market is targeting a 10-year Treasury yield of 4.18% within three weeks. Another position is expecting a deeper rally in the bond market, with a target yield of 4.1%. Despite some traders betting on a bond market rally, activity in futures and options has significantly diminished due to the rapidly changing and highly liquid nature of the situation in the Middle East, causing many to choose to stand aside and observe. On Monday, trading volume for futures and options linked to the Secured Overnight Financing Rate (SOFR) was only 45% and 37% respectively of the 20-day average level. Similarly, in the spot market, a survey by JPMorgan Chase of its clients shows that due to the current geopolitical backdrop, investors lack confidence in the direction of yields, leading to high levels of neutral positioning in US Treasuries.