US tapering: Bond managers cash in on treasury shorts

Fixed income managers have taken profits on their short positions in US treasuries in the expectation this week could mark the start of a short-term rally.

Paul Brain, head of fixed income at Newton, said the group has reduced short positions in US treasuries as a tactical play ahead of the Federal Reserve’s policy meeting on 17-18 September. The central bank is widely expected to announce a slowdown in the pace of its quantitative easing programme following the meeting. Brain said the decision has now been priced in by bond investors, adding 10-year treasury yields could fall from 3% to 2.5% over the course of Q4 as a result. “Tactically, treasuries look oversold. There is the key event of tapering news on the 18th, so there is the p...