Traders are heavily betting that the 10-year U.S. Treasury yield will return to 4% within weeks.

On December 23, traders are heavily buying Treasury options, betting that the yield on the U.S. 10-year Treasury will rise to 4% in the coming weeks— a level not reached since late November last year. This bullish bet comes as U.S. Treasury yields have actually risen slightly recently, with the 10-year yield hitting a high of around 4.20% earlier this month before fluctuating to 4.16% on Monday as investors weigh the latest economic data and look for clues on the future extent and timing of rate cuts from Fed officials. Data from the Chicago Mercantile Exchange (CME) released on Monday shows that there has been a significant amount of buying in March-expiring 10-year Treasury options contracts over the past week. The total premium paid for this position has been exceptionally large, amounting to about $80 million, and the number of open contracts has surged to 171,153, increasing by 300% in a week. (Jin10)