Traders increased bearish bets on US Treasures as April inflation surged due to
higher gasoline and grocery prices, lifting expectations for Federal Reserve
rate hikes. Short-term swaps now price a quarter-point hike by mid-2027, while
long-dated Treasures face pressure above 5% yields. SOFR options show demand
for puts hedging multiple hikes. JPMorgan’s Kelsey Berro said the market is
repricing “higher inflation for longer as a function of the increase in energy
prices.” Citigroup’s David Bieber noted, “Bearish sentiment is rebuilding into
the rise in yields with short risk being added to the front end in SOFR and in
the belly of the curves.”
