* Share of "short" investors is most since June
* No active clients bullish on long-dated issues in week
NEW YORK, April 15 More investors pared their
holdings of longer-dated Treasuries in the latest week after the
minutes of the Federal Reserve's March policy meeting suggested
the U.S. central bank would be unlikely to raise interest rates
until the second half of 2015, according to a survey released on
Tuesday by J.P. Morgan Securities.
The latest Fed minutes, released last Wednesday, suggested
most policymakers wanted to stick with the near-zero rate policy
adopted in December 2008 until the U.S. economy creates more
jobs and an inflation rate achieves its 2 percent target.
The share of investors who said their holdings of
longer-dated U.S. government debt were greater than their
holdings of portfolio benchmarks fell to 11 percent from 25
percent a week earlier, J.P. Morgan Securities said.
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 latest Fed minutes stoked immediate demand for short-
and medium-dated Treasuries and reduced holdings of longer-dated
issues as traders entered into curve "steepener" trades or
exited from curve "flatteners."
Longer-dated Treasuries rebounded last Thursday and Friday
as steep losses in global stock markets revived safe-haven bids.
Before the release of the March Fed minutes, some traders
were worried by the individual interest rate forecasts of Fed
policy-makers released at the close of the March Fed meeting,
which they interpreted to mean the Fed might consider raising
rates sooner than they had thought.
In addition, Fed Chair Janet Yellen, at a press conference
after the March policy meeting, said the Fed might increase
rates a "considerable time" after it completed its bond-purchase
program, a period she defined as "around six months."
Some investors had entered into curve flatteners or exited
from curve steepeners after the forecasts and Yellen's remarks,
moves that were favorable to longer-dated Treasuries.
Since the reversal of those moves following the Fed minutes,
32 percent of investors surveyed by J.P. Morgan said they were
"short" in duration of Treasuries, or owning fewer longer-dated
Treasuries than the benchmarks against which their portfolios
are gauged, up from 20 percent last week.
The share of "shorts" exceeded "longs" by 21 percentage
points, the most since June 3, J.P. Morgan said.
Fifty-seven percent of investors surveyed said their
longer-dated Treasuries holdings matched their benchmarks,
compared with 55 percent a week earlier.
On Tuesday, benchmark 10-year Treasury yields
slipped 2 basis point to 2.62 percent on renewed selling in
stocks and fears about a possible civil war in Ukraine.
Among active clients, viewed as making speculative bets in
Treasuries, none said they held more longer-dated Treasuries
than their benchmarks, compared with 24 percent a week ago.
Fifty-four percent of active investors said their
longer-dated Treasuries holdings matched their benchmarks, up
from 38 percent the prior week.
Forty-six percent of the active clients said they were short
in duration versus their benchmarks, up from 38 percent last
week. This was the widest gap between active shorts and longs
since May 28, J.P. Morgan said.
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.
(Reporting by Richard Leong; Editing by Leslie Adler)