October 31, 2017 / 1:31 PM / a month ago

Net shorts on U.S. bonds rise ahead of Fed chair pick -JPMorgan

    NEW YORK, Oct 31 (Reuters) - The margin of investors who
said they had fewer longer-dated Treasuries than their
benchmarks over those who held more longer-dated bonds than
their benchmarks increased in the latest week, JPMorgan Chase &
Co's latest client survey showed on Tuesday.
    Investors have scaled back their holdings of longer-dated
government debt on speculation U.S. President Donald Trump might
nominate a Federal Reserve chair who favors a faster pace of
interest rate increases, analysts said.
    The trend persisted even after reports that Trump will
likely select Fed Governor Jerome Powell to replace current Fed
Chair Janet Yellen, whose term expires in early February.

    Powell is seen as likely to stick with the central bank's
gradual pace of rate increases. Stanford University economist
John Taylor, another possible candidate, is considered more
hawkish.
    Also in consideration for the Fed's top post by Trump were
Yellen, his economic adviser Gary Cohn and former Fed Governor
Kevin Warsh.
    Trump is expected to announce his nominee on Thursday after
the Fed's two-day policy meeting, which begins later on Tuesday.

    The share of investors who said on Monday they were "short"
longer-dated Treasuries inched up to 43 percent from to 40
percent a week ago. 
    The share who said they were "long" remained at 13 percent
for a second week.
    The net shorts grew to 30 percent, the most in four weeks,
from 27 percent a week ago. 
     Among active clients including market makers and hedge
funds, net shorts in longer-dated Treasuries were at 30 percent,
unchanged from a week earlier.
    At 9:15 a.m. (1315 GMT), the 10-year Treasury yield
 was 2.374 percent, down 0.4 basis point from late on
Monday and 3.2 basis points lower than a week ago.
    On Friday, the 10-year yield hit a seven-month peak at 2.477
percent, Reuters data showed.
    JPMorgan surveyed clients including bond fund managers,
central banks and sovereign wealth funds, as well as market
makers and hedge funds.
    The chart below displays the latest survey results of
JPMorgan's Treasury clients:

  All clients     Long   Neutral  Shorts     Net
                                           Position
 Oct. 30           13      44       43       -30
 Oct. 23           13      47       40       -27
 Oct. 16           15      55       30       -15
 Oct. 10           15      43       42       -27
 Oct. 2            5       51       44       -39
 Sept. 25          11      59       30       -19
 Sept. 18          16      61       23        -7
 Sept. 11          9       64       27       -18
 Active clients                                
 Oct. 30           10      50       40       -30
 Oct. 23           10      50       40       -30
 Oct. 16           10      80       10        0
 Oct. 11           10      40       50       -40
 Oct. 2            0       30       70       -70
 Sept. 25          20      50       30       -10
 Sept. 18          10      70       20       -10
 Sept. 11          0       90       10       -10
 * NOTE: Positive value denotes net long, negative value denotes
net short

    

 (Reporting by Richard Leong; Editing by Meredith Mazzilli)
  

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