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Home>UPDATE: Record level of investors are bearish on long-dated Treasurys

UPDATE: Record level of investors are bearish on long-dated Treasurys

UPDATE: Record level of investors are bearish on long-dated Treasurys

10/04/2017

By Sunny Oh

44% of investors surveyed betting on higher yields: J.P. Morgan

Bond bears are back and their numbers are growing.

The proportion of investors who betting on prices for long-dated Treasurys to fall versus those betting on prices to rise have climbed to a decade-high, according to a weekly client survey published Monday by J.P. Morgan Chase & Co.(JPM). Bond prices and yields move in opposite directions.

The bank polls an array of market participants including central banks and portfolio managers.

The margin of market participants with a net short position, a bet that prices will fall, rose to 39%, in more than 10 years. The last time it was lower was in September 2005. Among the more active clients, traders and hedge funds, 70% said they were betting on Treasury prices to slip.

"Investors' pessimism is more likely to prove to be correct, since in our view demand for Treasuries during the next year or so is unlikely to be anywhere near as strong as it was when the Fed raised rates in the mid-2000s," said John Higgins, chief market economist for Capital Economics, in a note to clients.

The 10-year Treasury yield has risen significantly from a 10-month low near the 2.00% set in early September to trade near the top end of its recent range below 2.40%. The selloff that lifted the benchmark note's yield, analysts said, was a hawkish speech by Federal Reserve Chairwoman Janet Yellen and renewed expectations that President Donald Trump and congressional Republicans will manage to enact tax cuts.

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