Traders Cash In on Trump-Driven Bond Surge
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Traders who placed bearish bets on US Treasury bonds a few weeks ago are likely reaping significant profits in the wake of Donald Trump's re-election, according to a report from Bloomberg. The former president's victory has triggered a surge in Treasury yields, pushing rates to multi-month highs and benefiting those who wagered on such an outcome.
As Treasury yields surged on Wednesday, several large block sales were observed in both 10-year note and long-bond options. The same option strikes were purchased at lower prices on October 11, suggesting these sales were designed to unwind positions established last month rather than establish new ones.
These October bets, known as "Trump trades," anticipated that a Trump victory would lead to increased tariffs, fiscal stimulus, and accelerated economic growth and inflation. The wagers also included bets on a strengthening dollar and US stock market gains, both of which materialized on Wednesday.
The options wagers established last month were targeting, in part, an increase in the 10-year yield to 4.5%. As bonds slumped on Wednesday, the rate on the 10-year maturity climbed to just below that level. The 30-year yield, meanwhile, experienced its largest increase since 2020, peaking at 4.68% and approaching the 4.75% target of the October options bets.
The block trades observed on Wednesday potentially generated combined profits of roughly $18.5 million and represented a partial unwinding of the wagers placed on October 11. The anonymity of trading in many of these contracts makes it difficult to pinpoint the firms involved.