Traders Brace for Lower Treasury Yields as Hedging Costs Rise

Bond traders are preparing for Treasury yields to drop further even as the 30-year reached its lowest level in six months on Tuesday.

The cost of protection against a bigger decline in yields across the curve is rapidly rising, according to pricing of options wagers. With the US government shutdown on its way to becoming the second longest on record, renewed concerns over the credit market and heightened US-China trade tensions, traders are piling into quality, risk-off assets. The advance in the Treasury market is pushing yields across the curve lower.

Over the past week, the cost of Treasury ...