Buy-side rates traders staying on sidelines after wild October

Funds cautious after staggering collapse of the year’s steepener trade

Once bitten, twice shy. After steepening for much of the year, yield curves globally have flattened sharply since early October, inflicting heavy losses on scores of funds. Now, even if some on the buy side think the squeeze on spreads has gone too far, most are sitting on their hands, loath to put on new steepener trades.

Thomas Pluta, global head of linear rates trading at JP Morgan, says position risks have been drastically reduced across the industry due to high levels of volatility and