Popular Hedge Fund Swaps Trade Is Quickly Getting Crowded Again

A widening move in dollar swap spreads is starting to accelerate again, as strategists at top US banks pile back into long recommendations.

Morgan Stanley, Barclays and Citibank have all touted the spread widener trade, targeting US government debt to outperform interest rate swaps. Since the start of September, the trade has performed well, rewarding those who have flocked to the popular recommendation.

This can be seen in the 10-year sector for example, where dollar swap spreads have widened in 19 of the past 26 sessions since the beginning of September. On Wednesday, the tenor peaked at 46 basis points ...