Investors slashed their bearish bets on U.S. Treasurys after the Federal Reserve unveiled another bond-buying program aimed at helping the U.S. economy, and worries persisted over Europe's sovereign debt turmoil.
These two factors caused a stampede into the U.S. government debt market, pushing down benchmark yields to levels not seen in at least 60 years.
The share of investors who said on Monday they were short, or owning fewer Treasurys compared to their portfolio benchmarks, fell to 4 percent from 15 percent last week, J.P. Morgan Securities said on Tuesday.
The weekly decline in short positions was the largest since Sept 19, 2005, it said.
The number of investors who said they are neutral, or holding Treasurys equal to their benchmarks, jumped to 85 percent, matching the record high set in August, J.P. Morgan Securities said.
The share of investors who said they are long U.S. government debt, or holding more Treasurys than their benchmarks, held steady at 11 percent.
It was the first time in seven months that there were more long investors in Treasurys than short investors.
In the meantime, the late summer rally in the Treasurys market has tapered off since Friday as investors reduced their safe-haven bond holdings on hopes that European leaders would commit more cash to combat the region's debt crisis.
The 30-year Treasury bond tumbled for a second straight day with its yield rising to 3.07 percent early Tuesday. A week ago, the 30-year yield ended at 3.20 percent.
The yield on benchmark 10-year U.S. Treasury notes last traded at 1.97 percent early Tuesday after touching 1.67 percent last Friday, which was the lowest level in at least 60 years.
Last week, the Fed said it would buy longer-dated debt and sell short-dated notes, a move that traders and analysts refer as "Operation Twist." This latest bond program from the U.S. central bank is worth $400 billion and is aimed at lowering mortgage rates and other long-term borrowing costs with the goal of stimulating a sluggish U.S. economy.
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