March 28, 2017 / 2:07 PM / 8 months ago

Investors pare bullish U.S. bond bets -JP Morgan survey

NEW YORK, March 28 (Reuters) - Investors reduced bullish bets on longer-dated U.S. Treasuries on concerns that U.S. President Donald Trump and top Republican lawmakers may struggle to pass fiscal stimulus policies, J.P. Morgan’s latest Treasury client survey showed on Tuesday.

Their nervousness intensified after House of Representatives Speaker Paul Ryan on Friday shelved a Republican-sponsored bill to overhaul the Obama administration’s 2010 healthcare law due to a lack of support, spurring bids for longer-dated Treasuries.

Investors are worried the setback could hamper efforts for a broad restructuring of the tax code, including cuts to the rates paid by corporations. The anticipated tax cuts had underpinned the surge in bond yields and stock prices following Trump’s win in the Nov. 8 presidential election.

The share of “long” investors who said they were holding more longer-dated Treasuries than their benchmarks fell to 16 percent in the week of March 27 from 23 percent in the prior week, J.P. Morgan’s survey showed.

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

The yield on the benchmark 10-year Treasury was 2.362 percent early on Tuesday, down from 2.434 percent a week ago. It hit a one-month low of 2.348 percent on Monday.

The share of “short” investors who said they were holding fewer longer-dated U.S. government securities than their portfolio benchmarks fell to 20 percent from 23 percent the previous week.

Short investors outnumbered long investors by 4 percentage points. A week ago they were equal.

The share of “neutral” investors who said they were holding amounts of longer-dated Treasuries that match their benchmarks rose to 64 percent from 54 percent last week, the survey showed.

Active clients that include market makers and hedge funds, who are seen to take on speculative bets in Treasuries, turned much more neutral in the latest week, the J.P. Morgan survey showed.

Eighty percent of them said they were neutral, up from 50 percent the prior week. None of them said they were short, compared with 20 percent last week, while 20 percent of them said they were long, which was less than 30 percent last week. (Reporting by Richard Leong; Editing by Paul Simao)

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