US Treasuries rally turns some investors cautious

NEW YORK: Some investors turned cautious on longer-dated US Treasuries as benchmark yields reached five-month lows on safe-haven bids due to weak US data and geopolitical concerns, J.P. Morgan's latest Treasury client survey showed on Tuesday.

The share of "neutral" investors who said they were holding amounts of longer-dated Treasuries that match their portfolio benchmarks rose to 64 percent in the week of April 17 from 57 percent the previous week, according to the J.P. Morgan's survey.

J.P. Morgan surveyed clients, including bond fund managers, central banks and sovereign wealth funds.

Worries about slowing US economic growth and a US military showdown with North Korea have stoked a flight-to-safety rally for Treasuries, but the current yield levels signal the bond market may be overbought, some analysts said.

The share of "long" investors who said they were holding more longer-dated Treasuries than their benchmarks remained at  18 percent for a second week.

The share of "short" investors who said they were holding fewer longer-dated US government securities than their portfolio benchmarks fell to 18 percent from 25 percent in the prior week, the survey showed.

Short investors equaled long investors in the latest week. A week ago, they outnumbered long investors by seven points.

On Tuesday, the yield on the benchmark 10-year Treasury fell to 2.20 percent, just above a five-month low of 2.198 percent struck on Monday, according to Reuters data.

Active clients, which included market makers and hedge funds, turned more bullish on longer-dated Treasuries in the latest week, the J.P. Morgan survey showed.

Thirty percent of them said they were long, compared with 10 percent last week. Ten percent of them said they were short, down from 30 percent, while sixty percent of them said they were neutral, same as a week earlier.