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Investors turn bullish on longer-dated U.S. Treasuries -JPM
March 7, 2017 / 6:23 PM / 9 months ago

Investors turn bullish on longer-dated U.S. Treasuries -JPM

* Investors turn net long on longer-dated U.S. bonds

* Active clients most net long since mid-June 2016

NEW YORK, March 7 (Reuters) - More investors were bullish on longer-dated U.S. Treasuries than those who were bearish for the for first time since Donald Trump’s U.S. presidential election victory that hammered bond markets across the globe in late 2016, J.P. Morgan said on Tuesday.

This reversal came even as Federal Reserve officials ramped up their rhetoric last week that they were prepared to raise short-term interest rates at their policy meeting next week.

The share of “long” investors, who said they were holding more longer-dated Treasuries than their benchmarks, rose to 20 percent in the week to March 6 from 18 percent in the preceding week, J.P. Morgan showed in its latest Treasury client survey.

J.P. Morgan surveyed clients that include bond fund managers, central banks and sovereign wealth funds.

The share of “short” investors who said they were holding less longer-dated U.S. government debt than their portfolio benchmarks fell to 18 percent from 20 percent from the previous week.

Since the start of the year, investors have reduced their bearish bets on bonds as the Trump administration and the Republican-controlled U.S. Congress have shared few specifics on their pledges on tax cuts, looser regulations and infrastructure spending.

At the end of 2016, expectations on speedy implementation of these fiscal measures had stoked jitters about a surge in federal borrowing and inflation.

Long investors outnumbered short investors, or net longs, for the first time since Oct. 24, 2016. In the latest week, the net longs were two percentage points, compared with net shorts of two percentage points in the preceding week.

Some fund managers have renewed their Treasury purchases since mid-December when the benchmark 10-year yield hit 2.64 percent, the highest since September 2014.

Early on Tuesday, the 10-year yield was 2.51 percent, up 1 basis point from late on Monday.

The share of “neutral” investors, who said on Monday they were holding amounts of longer-dated Treasuries that match their benchmarks, was unchanged at 62 percent, the survey showed.

Active clients that include market makers and hedge funds, which are seen to take on speculative bets in Treasuries, were especially bullish on bonds, the latest J.P. Morgan survey showed.

Forty percent of them said they were long, while none of them said they were short. This net long of 40 percentage points was the biggest since June 13, 2016. (Reporting by Richard Leong Editing by W Simon)

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