NEW YORK May 28 A private survey released on
Wednesday showed the number of investors who said they are
neutral on U.S. long-dated Treasuries was at the lowest since
late 2010, signaling the market's divergent views on when the
Federal Reserve might raise interest rates.
Benchmark Treasuries yields have fallen to their lowest
levels since last July on persistent demand for longer-dated
bonds stemming from worries that U.S. growth and inflation are
falling short of the Fed's forecasts. This would likely cause
policy-makers to refrain from raising interest rates until the
second half of 2015 at the earliest, analysts said.
On the other hand, evidence of job growth and manufacturing
activity rebounding from a harsh winter stoked some investors to
think the Fed might be ready to tighten policy sooner rather
than later, they said.
The share of neutral investors, or those who said they are
holding long-dated securities equal to their portfolio
benchmarks, fell 18 percentage points from the prior week to 48
percent. This is the lowest proportion of neutral investors
since Oct. 25, 2010, according to J.P. Morgan Securities that
conducted the survey.
More of the investors who were neutral last week turned
short on longer-dated Treasuries, meaning they said they held
fewer of these issues than their benchmarks.
The share of "short" investors rose to 35 percent in the
latest week, up from 24 percent in the prior week.
By holding fewer longer-dated Treasuries, investors reduce
the duration or interest rate risk of their portfolios in
anticipation of a market drop, which generally causes
longer-dated bonds to generate bigger losses than shorter-dated
Conversely, longer-dated Treasuries produce higher returns
than short-term debt in a market rally.
The share of "long" investors or those who said they held
more longer-dated Treasuries than their benchmarks rose to 17
percent from 10 percent the previous week.
The share of "short" investors exceeded the share of "long"
investors by 18 percentage points, up from 14 points last week.
Benchmark 10-year Treasuries yields fell more
than 4 basis points to 2.472 percent early Wednesday.
(Reporting by Richard Leong; Editing by Chizu Nomiyama)