Bond Traders Boost Bets on 10-Year Rally as Shutdown Begins (2)

Bond traders are pumping millions of dollars into options wagers that 10-year Treasuries are on the cusp of a rally that will drive yields to five-month lows.

Traders ramped upthe bullish positioning on Tuesday, the day before a US government shutdown that risks weighing on the economy, and which may cement expectations that the Federal Reserve will cut interest rates again at the end of October.

One bet Tuesday for a premium of $35 million targeted a decline in 10-year yields to about 4.05% before most of the options expire on Nov. 21, from around 4.15% now. Ten-year Treasury ...