NEW YORK, June 13 (Reuters) - The margin of investors who are bearish on longer-dated U.S. Treasuries over those who are bullish grew to its widest in six months, J.P. Morgan’s latest Treasury client survey showed on Tuesday.
The share of “short” investors who said they were holding fewer longer-dated U.S. government securities than their portfolio benchmarks rose to 27 percent from 23 percent in the prior week, according to the survey.
J.P. Morgan surveyed clients including bond fund managers, central banks and sovereign wealth funds.
The share of “long” investors who said they were holding more longer-dated Treasuries than their benchmarks fell to 9 percent from 11 percent the prior week.
Short investors outnumbered long investors by 18 points, higher than last week’s 12 points. This was most net shorts since Dec. 12, 2016, J.P. Morgan said.
The shift in positionings came ahead of the Federal Reserve’s two-day meeting this week, where analysts and traders widely expect the U.S. central bank to raise key short-term interest rates by a quarter point to 1.00-1.25 percent. This would mark the Fed’s second rate increase in 2017.
On the other hand, data showing U.S. inflation softening increased bets that Fed policy makers may slow their pace of rate increases. This view has stoked curve-flattening trades based on the notion that longer-dated Treasuries would fare better than shorter-dated issues in a low inflation environment.
On Tuesday, the yield on the benchmark 10-year Treasury was 2.209 percent, up from a near six-month low of 2.129 percent set a week earlier, according to Reuters data.
Active clients, which included market makers and hedge funds, increased their bearishness on longer-dated Treasuries in the latest week, the J.P. Morgan survey showed.
Half of those clients said they were short, up from 30 percent a week ago, while 10 percent said they were long, down from 10 percent last week. The rest said they were neutral, down from 50 percent a week earlier. (Reporting by Richard Leong; editing by Grant McCool)