Bond Traders Net Millions on Bearish Option Bets After Trump Win

In the market for Treasury options, speculators appear to be cashing in on bets placed a few weeks ago that would benefit from a jump in yields, and are likely netting millions of dollars in profits.

As Treasury yields surged to multi-month highs Wednesday in the wake of Donald Trump’s re-election to the presidency, several large block sales were seen in US bond options, in both 10-year notes and the long-bond contract. The same option strikes were bought on Oct. 11 at lower prices, suggesting Wednesday’s sales were a move to unwind the positions entered last month, rather than a new stake.

The October bets were part of so-called Trump trades anticipating that a victory by the Republican former president would usher in steeper tariffs and fiscal stimulus, spurring quicker economic growth and inflation and a wave of additional Treasury issuance. The wagers also encompassed bets that the dollar and US stocks would gain, which also came to fruition Wednesday.

The options wagers established last month were targeting, in part, an increase in the 10-year yield to 4.5%, and as bonds slumped on Wednesday, the rate on the maturity climbed to just below that level. The 30-year yield, meanwhile, rose the most since 2020, peaking at 4.68% and approaching the 4.75% target of the October options bets.

The block trades seen through midday Wednesday potentially netted roughly $18.5 million in profit combined and amounted to a partial unwinding of the wagers placed on Oct. 11. Trading in many of these contracts is anonymous, making it difficult to identify the firms involved.

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