Bond investors grew more polarized about owning U.S. longer-dated government debt after a safe-haven rally in the bond market sparked by a fresh round of tariffs between China and the United States, a J.P. Morgan survey showed on Tuesday.
The share of investors who said they were long or hold more longer-dated Treasuries than their portfolio benchmarks, grew to 32 per cent on Monday, from 28 per cent a week earlier and matching the level seen two weeks ago, J.P. Morgan said.
The share of investors who said they were short or hold fewer longer-dated Treasuries than their portfolio benchmarks, increased to 19 per cent from 13 per cent the week before.
The share of longs exceeded the share of shorts by 13 percentage points, down from 15 points a week ago.
On Monday, China’s finance ministry said it planned to set import tariffs ranging from 5 per cent to 25 per cent on 5,140 U.S. products on a target list worth about $60 billion. It said the tariffs will take effect on June 1.
The move followed United States’ tariff increase on $200 billion of Chinese imports on Friday.
The unexpected breakdown in trade talks between the two economic powers kindled fears of a continuing trade war, sparking a stampede from stocks and risky assets into Treasuries, yen and gold on Monday.
The yields on benchmark 10-year Treasuries fell to 2.389 per cent on Monday, the lowest since March 28. They were 2.409 per cent in early U.S. trading on Tuesday.
The latest survey showed the share of investors who said they were neutral or holding longer-dated Treasuries equal to their portfolio benchmarks, fell to 49 per cent on Monday.
This was the lowest neutral reading since March 4 and below 59 per cent the week before.
Among active clients which include hedge funds and market makers, the share who said they are long on Monday doubled to 40 per cent from the previous week.
Those who said they were short increased to 10 per cent from zero in the prior week.