NEW YORK, June 3 The difference between the
number of investors who said they are bearish on U.S. long-dated
Treasuries exceeded those who are bullish grew to its highest in
eight years, according to a J.P. Morgan survey.
A widening gap between those who are "short" long-dated U.S.
government debt and those who are "long" belied the bond market
rally in May when benchmark yields fell to 2.40 percent last
week, which was an 11-month low.
Persistent demand for longer-dated bonds stemmed from
worries that U.S. growth and inflation are falling short of the
Foreign demand also exacerbated the drop in U.S. yields as
investors anticipate the European Central Bank might lower
interest rates on Thursday to avert deflation in the euro zone,
according to analysts.
The share of "short" investors exceeded the share of "long"
investors by 29 percentage points, which was the highest since
May 1, 2006, according to J.P. Morgan Securities.
The share of "short" investors rose to 40 percent in the
latest week ending June 2, up from 35 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 fell to 11
percent from 17 percent.
Long-dated Treasuries were the top performing U.S. bonds in
May as government bonds that mature in 20 years or longer earned
a 3.02 percent total return, according to an index compiled by
The share of neutral investors, or those who said they are
holding long-dated securities equal to their portfolio
benchmarks, edged up to 49 percent from last week's 48 percent
which was the lowest proportion since Oct. 25, 2010.
Benchmark 10-year Treasuries yields rose more
than 3 basis points to 2.568 percent early Tuesday.
(Reporting by Richard Leong Editing by W Simon)