August 6, 2019 / 3:03 PM / 3 months ago

Investors less bullish on U.S. bonds after rally -survey

NEW YORK, Aug 6 (Reuters) - Bond investors dialed back their bullish bets on U.S. longer-dated government debt as escalating tensions between China and the United States touched off a massive bond market rally, a J.P. Morgan survey showed on Tuesday.

The share of investors who said on Monday they were “long,” or holding more longer-dated Treasuries than their portfolio benchmarks, exceeded those investors who said they were “short,” or holding fewer longer-term government debt issues than their benchmarks, by 5 percentage points.

This was lower than a 13 point difference a week earlier, which was the most net longs in two months, J.P. Morgan said.

On Monday, China allowed the yuan to weaken to 7 per dollar, a level not seen in a decade, after U.S. President Donald Trump threatened last Thursday to impose 10% tariffs on $300 billion worth of Chinese imports to pressure Beijing for a trade deal.

Later Monday, the U.S. Treasury Department labeled China as a currency manipulator.

Anxiety about the increasing trade friction between the world’s two biggest economies had stoked a dramatic sell-off in stock markets worldwide and a stampede into Treasuries, gold and yen.

Benchmark 10-year U.S. yields fell to 1.672% early Tuesday, which was the lowest since October 2016, while Wall Street suffered its worst day so far this year on Monday.

Financial markets calmed a bit on Tuesday as China fixed the yuan at a tad stronger level versus the greenback, while top White House economic adviser Larry Kudlow told CNBC television that Trump would like to continue trade talks with China.

Meanwhile, the Treasury Department planned to sell $84 billion of coupon-bearing debt this week as a part of its quarterly refunding. The sales include a $27 billion auction of 10-year notes on Wednesday and $19 billion of 30-year bonds on Thursday.

Reporting by Richard Leong; Editing by David Gregorio

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