By TJ Kim, Bondsquawk
Amid the recent rise in the 10-Yr Treasury yield, some Bullish active managers migrated toward the Bear camp this week. However, the majority of Fund Managers did not flinch amid the drop in Treasury prices. 77% of all managers maintained their neutral stance, making no bet on the direction of interest rates according to JP Morgan.
According to JP Morgan’s most recent Treasury Client Survey report released August 20, only 9% of all bond Fund Managers surveyed are making bets that interest rates will rise, unchanged from the prior week. The percent of Neutrals stayed at 72%. This places the lowest tally of bears among all managers since mid-February when only 7% were making bearish bets and when the 10-Year yield was at 1.97%. Furthermore, this recent survey results is below the 4-week moving average of Treasury Bears of 14%.
With the amount of Bulls remaining the same from last week at 19%, the All Client Sentiment Survey did not change with last week’s result at 112%. A Sentiment Survey with a reading below 100% generally equates to Bearishness or shorting Treasuries and a print above suggests Bullishness or going Long Treasuries. A reading of 100% suggests Neutral or no active interest rate bet relative to their benchmarks.
As for Active Managers which include clients that utilize more interest rate bets as part of their strategy and may deviate their durations from their benchmarks more frequently, the number of Active Managers taking short positions increased by 7% this week to a final tally of 15%. Only 8% of Active Managers were bullish on Treasuries while 77% remain on the sidelines in this current interest rate environment.
As a result, the Active Client Sentiment Survey dropped from 108% of last week to 92%. The Sentiment Survey reached a high of 138% three weeks ago when 38% of managers were making bets for lower rates. Conversely, the most recent low occurred in early June when the Sentiment Survey reached 77%.