August 28, 2018 / 2:00 PM / a month ago

UPDATE 1-U.S. investors most net short in Treasuries since March - survey

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NEW YORK, Aug 28 (Reuters) - Bond investors turned the most bearish on longer-dated U.S. government debt on Monday in more than five months, prompted by this week’s government debt supply and easing trade tension between Mexico and the United States, a J.P. Morgan survey showed on Tuesday.

The margin of investors who said they are “short” or hold fewer Treasuries than their portfolio benchmarks over those who said they are “long” or hold more Treasuries than their benchmarks grew to 21 percent, which was the highest since March 19, according to the survey.

The survey was taken after Federal Reserve Chairman Jerome Powell’s remarks on Friday that the U.S. central bank remains on track for gradual interest rate increases as the economy has shown further improvement.

His comments at the annual research symposium in Jackson Hole, Wyoming, spurred buying of longer-dated Treasuries, flattening the yield curve to levels not seen since 2007.

The yield curve has steepened since Monday with the spread between two-year and 10-year yields widening to near 22 basis points, the steepest level in three sessions.

The share of investors who told J.P. Morgan on Monday they were neutral, or holding longer-dated bonds matching their benchmarks, was 57 percent for a third straight week, according to the bank’s latest Treasury client survey.

The bearish outlook on Treasuries was also shown in the positioning data from the Commodity Futures Trading Commission.

Speculative net shorts in 10-year Treasury futures reached a record high on Aug. 21, according to CFTC’s Commitments of Traders figures released on Friday.

Reporting by Richard Leong Editing by Susan Thomas

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