Treasury Bears Are Tougher to Find After Crude Oil Prices Plunge

JPMorgan Chase survey finds move toward bullish stance
Updated on

The ranks of bearish investors in U.S. government debt have thinned, thanks to the decline in crude oil prices.

This month's 10 percent dive in commodity prices led to a drop in the bond market's inflation forecasts. Lower inflation is good for long-term Treasuries, and investors are noticing.

Treasury shorts

The share of JPMorgan Chase & Co. clients betting on declines in government-debt fell in the past week, the bank said Tuesday. The bears still outnumber the bulls, but only by 5 percentage points, the least since late February.

``As commodity prices started going down, everyone got comfortable thinking we're not having inflation,'' said Peter Tchir, head of macro strategy with Brean Capital LLC in New York. ``All of a sudden, everyone's a little offsides,'' and he thinks that leaves Treasuries vulnerable to declines.

There are other signs that investors are more upbeat about Treasuries than they were a few weeks ago. Speculative futures investors turned bullish for the first time since September last week. And the share of investors betting on declines in the $5.1 billion iShares 20+ Year Treasury Bond exchange-traded fund has dropped nearly 10 percentage points in recent days, according to Markit data.

Markit short interest

Bearish bets on iShares 20+ Year Treasury Bond exchange-traded fund decrease

Markit data compiled by Bloomberg

The iShares ETF brought in a net $614 million in the past four weeks, according to Bloomberg data. That's an about-face from the previous two months, when investors made net withdrawals of cash, to the tune of $1.7 billion.