U.S. Treasuries investors most bearish in 19 months -survey

Tue Jan 29, 2013 10:16am EST

* Most "short" Treasuries investors since July 2011 -survey

* Number of "longs" rebounds from over 16-month low

* More than half of active investors said bearish on bonds

NEW YORK, Jan 29 (Reuters) - The number of investors who are bearish on U.S. Treasuries grew to its highest in nearly 19 months as some favored stocks and other higher-yielding assets, a private survey released on Tuesday showed.

Encouraging domestic economic data and signs of a healthier banking system in Europe spurred purchases in equities, corporate bonds and other risky investments and selling in safe-haven U.S. and German government bonds.

On Monday, the yield on benchmark 10-year Treasury notes rose above 2 percent, a level not seen in nine months even as Wall Street stocks retreated from their five-year highs set last week.

In the latest survey from J.P. Morgan Securities, one in four investors said on Monday they were "short" Treasuries, or owning fewer Treasuries than their benchmarks.

This was the highest level of "shorts" since July 5, 2011, J.P. Morgan said.

Still, many investors remained wary about a protracted standoff in Washington over cutting federal spending and, to a lesser extent, about the debt ceiling.

Last week, Congress and President Barack Obama agreed to a near four-month extension of the debt limit, which was at $16.4 trillion, in a bid to avert a U.S. default.

The share of investors who were "long", or holding more Treasuries than their benchmarks, rebounded from the lowest in more than 16 months set last week.

Long investors accounted for 13 percent of the survey, up from 7 percent the prior week, according to J.P. Morgan Securities' latest weekly survey of its Treasuries clients.

The share of investors surveyed who said they were "neutral" on U.S. government debt, or holding Treasuries equal to their portfolio benchmarks, fell to 62 percent from 74 percent the previous week.

Within the survey, more than half of active clients, including market makers and hedge funds, who are viewed as taking on speculative bets in Treasuries, expected Treasury yields to rise in the latest week.

The share of shorts among active clients rose to 54 percent from 46 percent, while the share of neutrals fell to 38 percent from 54 percent last week.

The share of longs among active clients rose to 8 percent from zero, which was a level not seen since the week of Nov. 5.

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