* Investors said favoring stocks, higher-yielding assets
* Washington budget fight keeps investors defensive
* Share of active "longs" falls to zero in latest week
NEW YORK, Jan 23 The number of investors who are
bullish on U.S. Treasuries fell to the lowest level in over 16
months as some of them favored stocks and other higher-yielding
assets, a private survey released on Wednesday showed.
While the budget fight in Washington has been a drag on
investor confidence, mildly encouraging economic data and
corporate results have kept Wall Street stock prices near
five-year highs and fueled demand for corporate bonds.
Top Federal Reserve officials including Chairman Ben
Bernanke have suggested the central bank will continue its bond
purchases into the end of the year in a bid to hold down
long-term borrowing costs with the goal to reduce unemployment.
However, many investors remained cautious on persistent
concerns about a protracted standoff in Washington over cutting
federal spending and, to a lesser extent, about the debt
The share of investors who were "long", or holding more
Treasuries than their benchmarks, dropped to 7 percent from 21
percent the previous week, according to J.P. Morgan Securities'
latest weekly survey of its Treasuries clients.
The latest figure was at its lowest level since the week
ended Aug. 15, 2011, after the first debt ceiling fight between
U.S. President Barack Obama and Republican lawmakers and
Standard & Poor's stripped the United States of its top credit
The previous week's reading showed the most "long" investors
in two months.
The United States will near its $16.4 trillion debt ceiling
between late February to March as it has implemented special
measures to meet its financial obligations since the end of
December. [ID: nL2N0AJDXD]
Republican lawmakers in the House of Representatives aimed
to pass a bill later on Wednesday that would provide a near
four-month extension of the debt limit and avert a U.S. default.
U.S. President Barack Obama said he would sign the short-term
The prospect of no agreement on raising the debt ceiling
would lead to scenarios including a default on U.S. bonds and
downgrades of the U.S. credit rating, which then would reduce
the longer-term appeal of Treasuries, analysts said.
While a temporary increase in the debt ceiling will stem an
imminent U.S. default, there has been little movement toward a
deal between the two major U.S. parties on reducing spending,
causing most investors to not pare their Treasuries holdings too
much in their search for yields.
The share of investors surveyed who said they were "neutral"
on U.S. government debt, or holding Treasuries equal to their
portfolio benchmarks, rose to 74 percent from 64 percent the
The share of investors who said on Tuesday they were "short"
Treasuries, or owning fewer Treasuries than their benchmarks,
increased to 19 percent from 15 percent the prior week.
Benchmark 10-year Treasury notes were up 4/32 in price early
Wednesday, yielding 1.828 percent, down 2 basis
points from late on Tuesday. On Jan. 4, the 10-year yield
climbed near 2 percent its highest level in eight months.
Wall Street shares opened higher on Wednesday.
Within the survey, more 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
The share of shorts among active clients rose to 46 percent
from 31 percent, while the share of neutrals was unchanged at 54
The share of longs among active clients dropped to zero, a
level not since the week of Nov. 5. Last week, the active
"longs" touched its highest level since Dec. 3.