* Investors turn "net short" for 1st time since June
* Active clients' bond holdings unchanged again
NEW YORK Dec 4 Investors reduced their U.S.
Treasuries holdings after making room for $99 billion in supply
last week, while most of them said they were cautious with their
government debt position given the budget standoff in
Washington, a survey released on Tuesday showed.
The share of investors who said on Monday they were "long"
Treasuries, or holding more government debt than their portfolio
benchmarks, fell to 13 percent from 17 percent in the prior
week, J.P. Morgan Securities said in its weekly Treasury client
On the other hand, the share of investors who were "short"
on Monday, or holding less Treasuries than their benchmarks,
rose to 17 percent from 13 percent the previous week.
It was first time since late June that investors were "net
short" or there were more "shorts" than "longs," according to
Last week, the U.S. Treasury Department sold $35 billion in
two-year notes ; $35 billion in five-year debt
and $29 billion in seven-year notes to
solid demand. With competition from an expected wave of
corporate bond supply this week, some investors might be
lightening on their Treasuries holdings, analysts said.
"We are trying to reduce some of last week's inventory,"
said Jim Vogel, interest rate strategist at FTN Financial in
The share of investors surveyed who said they were "neutral"
on U.S. government debt, or holding Treasuries equal to their
portfolio benchmarks, was unchanged at 70 percent.
Investors turned cautious after the U.S. presidential
election a month ago on worries about a protracted and
contentious negotiation on a budget deal between President
Barack Obama and top Republican lawmakers.
If they fail to reach a pact before year-end, a fiscal
contraction, through a combination of automatic tax hikes and
spending cuts worth $600 billion dubbed the "fiscal cliff," will
phase in next year. Economists have warned this would likely
cause a U.S. recession.
While fiscal cliff anxiety has fed safe-haven demand for
Treasuries, the low yields on U.S. government debt have led
investors to seek riskier investments for higher income,
On Tuesday, the yield on benchmark 10-year Treasury notes
was 1.618 percent, down 0.4 basis point from late on
Monday and down 2.1 basis points from a week earlier.
While there were moderate changes in overall Treasuries
positions in the latest week, active clients, including market
makers and hedge funds, who are viewed as taking on speculative
bets in Treasuries, clung to their positions for another week.
The share of longs among active traders was unchanged at 8
percent, while the share of neutrals was steady at 69 percent
and the share of shorts was unchanged at 23 percent.