Investors cut longer-dated Treasuries after job data -JPM survey
NEW YORK, Sept 10
NEW YORK, Sept 10 (Reuters) - Investors trimmed their holdings of longer-dated Treasuries in the latest week after a disappointing U.S. jobs report failed to alter expectations the Federal Reserve would pare its bond purchases next week, according to a survey released on Tuesday by J.P. Morgan Securities.
This week's $65 billion worth of Treasuries supply, plus a mega bond offering from Verizon, also spurred investors to reduce their longer-dated Treasuries holdings, analysts said.
The share of investors who said on Monday that their holdings of longer-dated U.S. government debt were greater than their holdings of portfolio benchmarks fell to 15 percent from 23 percent a week earlier, J.P. Morgan Securities said.
By holding fewer longer-dated Treasuries, investors lower the duration, or interest rate, risk to their portfolios in anticipation of a market decline, which generally causes longer-dated bonds to generate higher losses than shorter-dated debt.
In J.P. Morgan's survey of its Treasuries clients, 62 percent said they were "neutral" in their duration on U.S. government debt, or owned longer-dated Treasuries equal to their benchmarks, matching last week's level.
Twenty-three percent of its Treasuries clients said they were "short" in duration of Treasuries, or owning fewer longer-dated Treasuries than their benchmarks, up from 15 percent a week earlier.
The share of "shorts" exceeded "longs" in the latest week by 8 percentage points, which was the highest level of nets shorts since June 24. A week ago, the share of longs topped shorts by 8 points, J.P. Morgan said.
In early Tuesday trading, benchmark 10-year Treasury yields rose 4.5 basis points to 2.959 percent on upbeat economic data from China and reduced likelihood on a U.S. military strike against Syria.
The 10-year note yield rose above 3 percent Friday, which was the highest since July 2011, before the release of the August payrolls data. The government reported U.S. employers hired 169,000 workers, less than the 180,000 forecast by economists polled by Reuters.
Economists told Reuters after the latest jobs report they now expect the Fed to begin paring its purchases of Treasuries and mortgage-backed securities by $10 billion a month, down from the $15 billion median in Friday's primary dealer poll and a wider poll conducted in August.
The U.S. central bank will hold a policy meeting on Sept 17-18.
Among active clients, viewed as making speculative bets in Treasuries, 15 percent of active investors said they held more longer-dated Treasuries than their benchmarks, down from 23 percent last week, while 31 percent said they were short in duration versus their benchmarks, up from 15 percent last week.
Fifty-four percent of active investors said their longer-dated Treasuries holdings matched benchmarks, down from 62 percent the prior week.
J.P. Morgan surveys 40 to 60 of its Treasuries clients weekly, of which 60 percent are fund managers, 25 percent are speculative accounts, and 15 percent are central banks and sovereign wealth funds.
It asks 10 to 20 of its active clients each week about their Treasuries holdings, of which 70 percent are speculative accounts and the rest are money managers.