A trader talks on two phones during a Spanish Treasury bills auction at a private bank in Madrid, April 17, 2012.

Brevan Howard, the hedge fund run by billionaire Alan Howard, is launching a new fund to bet on an increase in volatility in the US government bond market.

Brevan Howard, the London-based hedge fund run by billionaire Alan Howard, is launching a new fund to bet on an increase in volatility in the US Treasury market.

The fund, called the Brevan Howard CMS Curve Cap Master Fund, will be led by senior trader Rishi Shah, who has been with the firm since 2010 in Geneva and New York, according to documents seen by Business Insider.

The new fund will use what are called constant maturity swap curve caps to bet on both a steepening of the US yield curve and an increase in curve volatility.

In simple terms, the yield curve shows the difference between yields on short term government debt and long term government debt. The smaller the difference, the flatter the curve.

Interest rate policy and government bond buying have combined to both flatten the curve and reduce volatility.

Brevan Howard is betting that's going to reverse as central banks start to shrink their balance sheets and uncertainty over the leadership of the Fed circulates. A spokesman for the firm declined to comment.

Some of the details of the fund launch were previously reported by Bloomberg.

The US government bond market makes up around 30% of the fixed-income market, according to the Securities Industry and Financial Markets Association and American Bankers Association. In a letter to the Securities and Exchange Commission last year, they said the Treasury market is "the most important global benchmark for pricing and hedging spread asset classes and is a key transmission mechanism for US monetary policy."

As of August, Brevan Howard managed about $11.1 billion firmwide, Business Insider previously reported. That's down from about $40 billion in 2013.

The firm has in recent months been launching new strategies, including one managed by founder Alan Howard. The flagship fund fell 4.61% this year through September, Business Insider reported.