Investors hold fewest net shorts on U.S. Treasuries since November: JPM

NEW YORK The margin on bearish bets on longer-dated U.S. Treasuries over bullish positions shrank to its smallest since late November as bargain-minded investors emerged after the recent bond market selloff, a J.P. Morgan survey released on Wednesday showed.

Some fund managers stepped up their Treasury purchases in the latter half of December after the benchmark 10-year yield hit 2.64 percent, the highest since September 2014, after the Federal Reserve raised short-term interest rates by a quarter point on Dec. 14, analysts said.

The share of “long” investors who said they were holding more longer-dated U.S. government debt than their portfolio benchmarks was 11 percent, matching the level on Dec. 12 when J.P. Morgan released its last Treasury survey.

The firm’s survey of clients include bond fund managers, central banks and sovereign wealth funds.

The share of “short” investors, who said they were holding fewer longer-dated Treasuries than their benchmarks, tumbled to 20 percent from 39 percent three weeks earlier.

Nevertheless, short investors outnumbered long investors, or net shorts, by nine percentage points, which was the lowest since Nov. 28. That compared with 28 percentage points on Dec. 12, which was the biggest difference since June 28, 2015.

In addition to hints the Fed might increase interest rates faster in 2017, inflation worries intensified following an agreement among major oil producers to cut output, propelling crude prices to an 18-month high.

Uneasiness about inflation stemming from a possible fiscal stimulus package under a Trump administration has underpinned the jump in longer-dated U.S. yields since the Nov. 8 election.

On Wednesday, the 10-year yield was last at 2.450 percent, unchanged from on Tuesday but up about 60 basis points since Donald Trump’s presidential victory.

The share of “neutral” investors, who said on Tuesday they were holding amounts of longer-dated Treasuries that match their benchmarks, rose to 69 percent, up from 50 percent on Dec. 12, J.P. Morgan’s survey showed.

(Reporting by Richard Leong- Editing by Meredith Mazzilli)