Traders hold 10s30s euro steepener amid geopolitical shocks

Hedge funds and asset managers are keeping 10s30s euro steepener positions in place despite a series of geopolitical shocks and bouts of market volatility that briefly erased last year’s steepening.

The 10s30s steepener bets that the spread between 10-year and 30-year euro interest rate swaps will widen if longer-dated yields rise faster than intermediate maturities. Traders use the trade for positive carry and to position for higher long-term borrowing costs.

The spread widened by more than 50 basis points during 2025, one of the largest annual moves on record. The position lost ground after US military action against Iran earlier this year prompted renewed inflation concerns and expectations of tighter monetary policy, which flattened the curve. The steepener recovered in May and June, but renewed strikes in July and oil prices above $100 a barrel weighed on long-end yields and halted further steepening. The spread has recently started to widen again but sits near 10 basis points, below last year’s highs.

Data tracked by Barclays show investors have cut exposure rather than closing positions, indicating many funds are reducing size while keeping the trade. Market participants point to higher planned government debt issuance and structural shifts in demand for long-duration securities as reasons for maintaining the position.

Reforms in the Netherlands that shift about €1.6 trillion of pension assets from defined-benefit to defined-contribution arrangements are expected to lower long-term demand for government bonds and interest-rate swaps over time, which could support a steeper curve.

The European Central Bank left interest rates unchanged at its most recent meeting but flagged that further tightening is possible. Markets price roughly 42 basis points of additional ECB tightening before year-end, a view that has limited appetite for adding long-duration risk.

Julian Baker, co-head of EMEA linear rates trading at JPMorgan, noted: “The unwinding of steepener positions earlier this year proved painful for many investors. Nevertheless, the strategy continues to rank among the bank’s most popular trades with clients.”

Traders say the position is now managed with more caution: many funds have trimmed size and tightened risk controls while keeping the steepener as a medium-term exposure to changes in long-term borrowing costs and demand dynamics in European fixed income.