JPMorgan sees US$1.2 trillion reason to nix US yield rebound

TOKYO: Banks likely hold the equivalent of US$1.2 trillion worth of short positions in 10-year Treasuries, suggesting any rebound in yields could be capped if they cover their bets, according to JPMorgan Chase & Co.

Expectations in 2018 for interest-rate rises from the Federal Reserve led banks to position themselves short duration, wrote strategists including Matthew Jozoff in a note Feb. 28. The recent “vicious” rate rally has exacerbated this already painful positioning and the financial institutions will find themselves under pressure to buy duration, they said.