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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.

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