Treasury Investors Have Only Been This Neutral When Fed Eased

(Bloomberg) -- JPMorgan Chase & Co. says the Treasury market is acting like the Federal Reserve is more likely to ease policy than to tighten.

The bank’s client survey showed 75 percent of respondents are neutral on the bond market, a five-year high. Curiously, the poll has only favored neutrality to such an extent on 22 occasions in its 26-year history. 

“Every other instance has occurred just prior to or during a Fed easing regime,” according to JPMorgan. “Investors appear to be de-risking as geopolitical tensions have risen and in anticipation of domestic fiscal issues which could further contribute to uncertainty in September.”

Yields on 10-year Treasuries dropped to a nine-month low of 2.08 percent this week as North Korea lobbed missiles over Japan. Fed fund futures indicate a less than one-in-three chance of another rate hike by year’s end, after signaling better than even odds at the start of July.