Traders are increasingly doubling down on yield-curve steepeners, a strategy that bets on long-term interest rates rising faster than short-term rates, which is helping to keep the 10-year Treasury yield above the critical 4.50% level. This trend is supported by a recent narrowing of the yield curve, initially driven by what was perceived as a hawkish Federal Reserve stance. However, Fed Chair Powell's clarification that changes in the FOMC statement were merely linguistic adjustments has led investors to reconsider, prompting further steepener trades.
The demand for steepener trades, particularly in the 5s30s segment, reflects expectations of wider yield spreads, bolstered by fast money flows. Additionally, light sales and profit-taking in 10-year bonds during rallies are preventing yields from sustainably dropping below the 4.50% threshold. As of 10:49 on January 30, the 10-year Treasury yield stands at 4.51, slightly down from its last close of 4.55, with intraday movements ranging between 4.49 and 4.53. The upcoming month-end could introduce further yield volatility as investors adjust portfolios to meet duration benchmarks.