Hedge funds are returning to a popular rates trade despite uncertainties over inflation and Dutch pension reform.
Dealers report a renewal of interest in euro swap steepeners, which aim to profit from a widening gap between the fixed rates on short-dated and long-dated interest rate swaps.
In particular, traders are taking a punt on the spread between 10-year and 30-year swaps, known as 10s30s. This basis is likely to widen if central banks cut interest rates later this year, as expected.
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