Investors increase Treasuries holdings in week: survey

NEW YORK Wed Oct 10, 2012 11:01am EDT

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NEW YORK (Reuters) - Investors were more optimistic on the outlook for U.S. Treasury debt prices in the latest week as worries over the outcome of Europe's debt crisis supported safe-haven buying of U.S. government debt, a survey released on Wednesday showed.

The share of investors who said on Tuesday they were "long" on Treasuries, or holding more federal debt than their portfolio benchmarks, rose to 21 percent from 17 percent the prior week, J.P. Morgan Securities said on Wednesday in its weekly Treasury client survey.

Worries over contagion from Europe's credit crisis, along with concern over the sluggish pace of U.S. and global growth, appeared to be moving investors from neutral into long positions.

The share of investors who said they were "neutral" U.S. government debt, or holding Treasuries equal to their portfolio benchmarks, dipped to 64 percent from 68 percent last week.

The share of investors who were "short", or holding fewer Treasuries than their benchmarks, was unchanged on the week at 15 percent, according to the latest J.P. Morgan survey.

Benchmark 10-year Treasury notes on Wednesday were trading with a yield of 1.75 percent, not far off the record low of 1.38 percent touched on July 25.

IMF STOKES CONCERNS

The concern over European debt problems was stoked this week by an outlook from the International Monetary Fund, which downgraded its expectations for global economic growth and said the euro area is likely to contract this year. It also called the euro zone debt crisis the biggest risk to the world's financial health.

In the latest J.P. Morgan survey, active clients including market makers and hedge funds, who are viewed as taking on speculative bets in Treasuries, increased their long positions to 23 percent from 15 percent the previous week.

The share of these investors who said they were short Treasuries rose to 31 percent from 23 percent the previous week.

The percentage of active traders who were neutral fell to 46 percent from 62 percent last week.

(Reporting by Chris Reese; Editing by Theodore d'Afflisio)

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