Investors most neutral on bonds since July-survey

By Richard Leong

NEW YORK, Nov 23 (BestGrowthStock) – More investors turned neutral
on U.S. Treasuries, scaling back their bullish bets after the
Federal Reserve started its $600 billion bond purchase program
more than a week ago, a survey released on Tuesday showed.

The share of investors who said they are neutral on U.S.
government debt, or hold bonds matching their portfolio
benchmarks, grew to 67 percent on Monday from 63 percent last
week, J.P. Morgan Securities said.

This is the highest level of neutral investors since July
26, according to the firm.

“Bond investors bought the rumors and sold the news,” said
Brian Levitt, economist at OppenheimerFunds in New York.

Other surveys and data showed traders and money managers
reduced their profitable bets on the Fed’s second round of
quantitative easing, known as QE2.

Research firm Ried Thunberg ICAP said on Monday allocations
into Treasury and agency securities among 20 money managers it
surveyed averaged 31 percent in the week ended Nov. 19, down
from 35 percent in the prior week. It was as high as 39 percent
two weeks earlier.

Last week benchmark 10-year Treasury note yields
(US10YT=RR: ) flirted with 3 percent, their highest levels since
this summer, as investors exited from bets that bond prices
would go up on QE2 after the Fed announced its widely expected
program on Nov. 3.

Since Nov. 12, the Fed has bought about $46 billion in
Treasuries, part of its intended $105 billion in debt purchase
through mid-December.

Of that amount, $75 billion is directly tied to QE2. The
rest of the planned purchases is related to reinvestment of
proceeds from maturing mortgage securities it bought during its
first round of quantitative easing. See [ID:nN20EDTABL]

On Monday, the share of investors who said they are “long,”
or owning more Treasuries than their portfolio benchmarks, fell
to 25 percent from 27 percent previous week. The percentage of
longs recently peaked at 41 percent in October.

According to the latest J.P. Morgan survey, the share of
investors who were “short,” or owning less Treasuries than
their portfolio benchmarks, slipped to 8 percent from 10
percent last week.

The share of “longs” made up by active clients, including
market makers and hedge funds, held at 2 percent.

The amount of active clients who were “neutral” was 8
percent, unchanged from the prior week, while the share of
active clients who were “short” held at 1 percent for a second
straight week.

(Reporting by Richard Leong)

Investors most neutral on bonds since July-survey