J.P.Morgan Dig Into Client Positioning

J.P.Morgan note that their “latest Treasury Client Survey shows that our clients are now the most net long in two and a half years. Indeed, if recent events reduce the probability that the Fed will continue to hike interest rates through the summer and instead suggest that risks are now skewed towards an earlier pause, the time to enter “Fed on hold” trades, including being long duration, should be coming sooner. Arguably, the lack of conviction, expressed in the share of neutrals, is an even more important development: 78% of clients are now neutral on duration, which is near 3 standard deviations above the average of the last decade. Ultimately, despite the recent increase in net long exposures, we do not think that positioning is a headwind for lower yields at this point, given the elevated share of neutrals.”