NEW YORK: The share of investors who are bearish on U.S. longer-dated Treasuries and reckon their yields will rise climbed to its highest level since late July, according to a J.P. Morgan Securities survey released on Tuesday.
The share of investors who said on Monday they are "short" longer-dated U.S. government debt rose to 42 percent from 36 percent the previous week.
This was the largest share of investors who were "short" Treasuries since July 28, the firm said.
By holding fewer longer-dated Treasuries, investors reduce the duration risk or sensitivity of their portfolios in anticipation of a rise in interest rates. A rate rise causes the prices of longer-dated bonds to fall more than the prices of shorter-dated debt, resulting in larger losses.
Conversely, longer-dated Treasuries produce higher returns than short-term debt in a market rally.
A steady flow of solid U.S. economic data helped push the benchmark 10-year Treasuries yield above 2.60 percent to its loftiest in two months on Monday.
A research paper from the San Francisco Federal Reserve published last week said investors expect the Fed to keep rates lower for longer, and to increase them more slowly, than U.S monetary policy makers themselves expect. It stoked worries the market might be underestimating how quickly the central bank might tighten policy.
The Federal Open Market Committee will begin a two-day policy meeting later Tuesday. There has been a growing view the Fed's policy-setting group would signal in a statement due at 2 p.m. (1800 GMT) on Wednesday that it is leaning to move away from its near zero interest rate policy by the end of 2015.
The share of long investors or those who said they held more longer-dated Treasuries than their benchmarks rose to 13 percent from 11 percent.
There are those investors who believe the U.S. economy is fragile and the Fed is not ready to send out a hawkish sign.
The share of neutral investors, or those who said they were holding long-dated securities equal to their portfolio benchmarks, fell to 45 percent from last week's 53 percent.
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