Investors load up on US Treasuries after election - JPM survey

Wed Nov 14, 2012 10:59am EST

* "Fiscal cliff" seen pushing rush into Treasuries

* About 1 in 4 investors said long U.S. government debt

* Active clients pare pre-election neutral stance

NEW YORK, Nov 14 (Reuters) - Investors scrambled for U.S. government debt after last week's election because of worries about a protracted fight in Washington over massive budget cuts and tax hikes scheduled for next year, a survey released on Wednesday showed.

Investors here and abroad, together with foreign policy-makers, have fretted whether U.S. President Barack Obama and a divided Congress can reach a deal to avert $600 billion of automatic tax hikes and spending cuts, known as the fiscal cliff, that will phase in next year.

Fears that such an event could stun the world's biggest economy into a recession have led to sell-off across global stock markets and a rush into safe haven U.S. Treasuries.

The share of investors who said on Tuesday they were "long" U.S. government debt, or holding Treasuries more than their portfolio benchmarks, rose to 26 percent from 17 percent the prior week, J.P. Morgan Securities said in its weekly Treasury client survey.

This was the highest level of long investors since July 23.

The share of investors who said they were "short" Treasuries, or holding less government debt than their portfolio benchmarks, inched higher to 15 percent from 13 percent last week.

The share of investors who were "neutral", or holding Treasuries equal than their benchmarks, fell to 59 percent from 70 percent the prior week.

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, scaled back their neutral positions in Treasuries.

The percentage of active traders who were neutral fell to 54 percent from 85 percent the previous week.

The share of longs among active traders jumped to 23 percent from zero percent last week, while the share of shorts rose to 23 percent from 15 percent.

Benchmark U.S. 10-year Treasuries last traded down 3/32 in price at 100-5/32, yielding 1.606 percent, up 1 basis point from late on Tuesday when it touched its lowest level since early September.

A week ago, the 10-year yield was 1.644 percent.