The Federal Reserve is casting a long shadow over the world's biggest bond market, derailing a classic recovery trade and underscoring how an era of central-bank intervention will reverberate for some time to come.

The mere hint that the Fed may take additional steps to hold down long-term rates is causing Treasury traders to scale back so-called "steepener" bets—bets that longer-term debt will underperform shorter-dated obligations, widening the yield spread between the maturities. It's a tried-and-true strategy that has generated big profits over the years as economic rebounds pushed yields higher. Barclays Plc is keeping a lid on the size of its positions. Incapital is using options, rather than actual bonds, for a hedged—and more cautious—riff on the trade. And Nick Maroutsos of Janus Henderson Investors says some "could get flattened" by the wager.

It's the latest example of how the Fed's outsized presence in markets, which began with the 2008 financial crisis and shows no signs of ending, is distorting traditional trading strategies: It's squelching volatility, adding fuel to a record-setting advance in stocks, leaving credit markets priced to perfection, and curbing Treasury yields at levels that no longer fully reflect market sentiment or investors' belief in the economy.

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