Investors most net short on longer-dated U.S. bonds since May: JPM

NEW YORK Investors’ relative preference for longer-dated U.S. Treasuries fell to a five-month low in advance of the release of the government’s jobs report on Friday, according to a J.P. Morgan survey released on Tuesday.

A solid figure on employment growth in September likely will reinforce expectations that the Federal Reserve would raise interest rates by year-end, analysts and traders said.

The share of “short” investors who said on Monday they were holding fewer longer-dated U.S. government debt than their portfolio benchmarks rose to 25 percent from 20 percent the previous week, J.P. Morgan’s survey showed.

The share of “long” investors, who said they were holding more longer-dated Treasuries than their benchmarks, fell to 18 percent from 25 percent last week, J.P. Morgan said.

Short investors outnumbered long investors, or net shorts, by 7 percentage points, compared with last week when there was a net long of 5 percentage points. This was the most net shorts since May 2, the J.P. Morgan report said.

The share of “neutral” investors, who said they were holding amounts of longer-dated Treasuries that match their benchmarks, rose to 57 percent from 55 percent the prior week.

Benchmark 10-year Treasury yield has risen from its record low of 1.321 percent set on July 6, which stemmed from a flood of safe haven buying of U.S. government debt in reaction to Britain’s surprise vote to leave the European Union on June 23, according to Reuters data.

No imminent sign on further bond purchases from the European Central Bank and a change in policy stance from the Bank of Japan also stoked selling in longer-dated Treasuries during the third quarter.

The yield on 10-year Treasury yield rose to 1.655 percent earlier Tuesday, which was its highest level in nine trading sessions.

Economists polled by Reuters forecast U.S. employers likely added 175,000 workers in September, more than the 151,000 hired in August. They projected the jobless rate would hold at 4.9 percent.

U.S. interest rates futures on Tuesday suggested traders saw about a 63 percent chance the Fed would raise interest rates at its Dec. 13-14 policy meeting, according to CME Group’s FedWatch program.

(Reporting by Richard Leong; Editing by Bill Trott)

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