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Investors more polarized on U.S. Treasuries amid trade worries: survey

Published 05/14/2019, 10:16 AM
Updated 05/14/2019, 10:20 AM
© Reuters. A security officer keeps watch at U.S. food booths at SIAL food innovation exhibition, in Shanghai
US10YT=X
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NEW YORK (Reuters) - Bond investors grew more polarized about owning U.S. longer-dated government debt after a safe-haven rally in the bond market sparked by a fresh round of tariffs between China and the United States, a J.P. Morgan survey showed on Tuesday.

The share of investors who said they were long or hold more longer-dated Treasuries than their portfolio benchmarks, grew to 32% on Monday, from 28% a week earlier and matching the level seen two weeks ago, J.P. Morgan said.

The share of investors who said they were short or hold fewer longer-dated Treasuries than their portfolio benchmarks, increased to 19% from 13% the week before.

The share of longs exceeded the share of shorts by 13 percentage points, down from 15 points a week ago.

On Monday, China's finance ministry said it planned to set import tariffs ranging from 5% to 25% on 5,140 U.S. products on a target list worth about $60 billion. It said the tariffs will take effect on June 1.

The move followed United States' tariff increase on $200 billion of Chinese imports on Friday.

The unexpected breakdown in trade talks between the two economic powers kindled fears of a continuing trade war, sparking a stampede from stocks and risky assets into Treasuries, yen and gold on Monday.

The yields on benchmark 10-year Treasuries (US10YT=RR) fell to 2.389% on Monday, the lowest since March 28. They were 2.409% in early U.S. trading on Tuesday.

The latest survey showed the share of investors who said they were neutral or holding longer-dated Treasuries equal to their portfolio benchmarks, fell to 49% on Monday.

This was the lowest neutral reading since March 4 and below 59% the week before.

Among active clients which include hedge funds and market makers, the share who said they are long on Monday doubled to 40% from the previous week.

© Reuters. A security officer keeps watch at U.S. food booths at SIAL food innovation exhibition, in Shanghai

Those who said they were short increased to 10% from zero in the prior week.

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