February 26, 2019 / 4:23 PM / 8 months ago

UPDATE 1-Investors most bullish on U.S. Treasuries since 2016 - survey

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NEW YORK, Feb 26 (Reuters) - Investor bullishness on U.S. Treasuries was at its strongest in about 2-1/2 years amid signs of slowing global economic growth and bets the Federal Reserve may halt the normalization of its balance sheet, a J.P. Morgan survey showed on Tuesday.

The margin of investors who said they were “long,” or holding more Treasuries than their portfolio benchmarks, over those who said they were “short,” or holding fewer Treasuries than their benchmarks, rose to 11 percent, the highest since Sept. 12, 2016. A week ago, they were net long by 5 percent, according to the survey.

Fed policymakers refrained from hiking interest rates further at their Jan. 29-30 policy meeting so that they have more time to assess the effects of a global economic slowdown.

They also signaled the Fed may slow or end reductions to its $4 trillion balance sheet, a process it had previously characterized as being on automatic pilot, according to minutes of the Fed’s policy meeting last month released on Feb. 20.

Twenty-eight percent of the investors surveyed said on Monday they were long on U.S. government bonds, up slightly from 27 percent the previous week, the J.P. Morgan survey showed.

The share of investors who said they were short Treasuries fell to 17 percent from 22 percent a week earlier.

The percentage of investors who said they were “neutral,” or holding Treasuries equal to their portfolio benchmarks, rose to 55 percent from 51 percent a week ago, J.P. Morgan said.

Positions among active clients, which include market makers and hedge funds, suggested they were neutral on longer-dated Treasuries. Active longs and shorts were equal at 20 percent for a second week.

On Tuesday, the benchmark 10-year Treasury yield was 2.650 percent, little changed from 2.645 percent a week earlier.

Reporting by Richard Leong; Editing by Bernadette Baum

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