JPMorgan Asset Management Boosts Treasury Holdings on Fed Bet

JPMorgan Asset Management boosted its Treasury holdings in recent weeks to take advantage of higher yields and on the expectation the Federal Reserve will maintain an accommodative monetary policy to spur growth.

The benchmark 10-year yield climbed to the highest level in 14 months last week amid speculation improving U.S. economic data will prompt the Fed to scale down its asset-purchase program. Chairman Ben S. Bernanke said last month the Fed could reduce stimulus if there are indications of economic growth will be sustained.

“You’ve got an ambiguous growth picture,” said Nick Gartside, international chief investment officer for fixed income in London at JPMorgan Asset Management, which oversees about $1.5 trillion. “That’s Treasury supportive because it means the risk is that central banks keep monetary policy looser as opposed to tightening it.”

The Treasury 10-year yield rose one basis point, or 0.01 percentage point, to 2.13 percent at 12:07 p.m. in New York after climbing to 2.23 percent on May 29, the highest level since April 2012.

JPMorgan Asset Management increased its holdings of Treasuries to “neutral-ish” from underweight “a week or so ago,” Gartside said. An underweight position means it owns fewer securities than recommended in the benchmark index it uses to track performance.

The Fed, which is buying $85 billion of government and mortgage-backed securities each month, will probably taper its purchases at some point, Gartside said.

“To us it’s just part of the natural evolution of central bank policy but I think the message is that it will still look loose as opposed to tight, irrespective of the degree of tapering,” he said.

The company prefers German and Japanese government bonds to Treasuries due to the differences in central-bank policy that will probably develop in light of the weaker underlying economies of Japan and the euro area, Gartside said.

Before it's here, it's on the Bloomberg Terminal.