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U.S. longer-dated bond net shorts fall before month-end -JPMorgan
May 31, 2017 / 2:28 PM / 6 months ago

U.S. longer-dated bond net shorts fall before month-end -JPMorgan

NEW YORK, May 31 (Reuters) - The margin of investors who are bearish on longer-dated U.S. Treasuries over those who are bullish shrank before the end of May, 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 fell to 27 percent from 30 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 held at 14 percent for a second week.

Short investors outnumbered long investors by 13 points, compared with last week’s 16 points which was the most since Dec. 12, 2016.

Investors expected longer-dated government bond yields would rise in the coming months as the U.S. labor market has strengthened further, analysts said.

Centrist Emmanuel Macron’s French presidential victory over anti-European Union rival Marine Le Pen caused investors to reduce their safe-haven holdings of government bonds, propelling benchmark U.S. yields to a five-week high earlier this month.

A heavy wave of U.S. government and corporate bond supply had also helped stoke the rise in longer-dated Treasury yields.

On the other hand, political uncertainties in Italy and Greece, together with doubts about whether U.S. inflation would reach the Federal Reserve’s 2 percent goal, have kept investors from piling on bets against longer-dated Treasuries, analysts said.

Since last week, investors have been snapping up longer-dated bonds to rebalance their portfolios at month-end and for curve-flattening trades based on the notion that longer-dated Treasuries would fare better than shorter-dated issues if the Federal Reserve raises overnight borrowing costs further, analysts said.

On Wednesday, the yield on the benchmark 10-year Treasury was 2.201 percent, compared with 2.297 percent a week ago, 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.

Thirty percent of those clients said they were short, up from 20 percent last week, while 20 percent said they were long, unchanged from a week ago. The rest said they were neutral, down from 60 percent a week earlier. (Reporting by Richard Leong; Editing by Meredith Mazzilli)

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