Bloomberg News

JPMorgan Says Emerging Debt Holdings Cut to 4-Year Low

February 22, 2013

Investors reduced holdings of emerging-market government debt to the lowest level since October 2008 as rising U.S. Treasury yields eroded the allure of the assets, a survey by JPMorgan Chase & Co. (JPM:US) shows.

Clients surveyed also cut their investment in developing- nation currencies by the most since May 2012, as the Japanese yen weakened, JPMorgan analysts led by Holly Huffman in New York wrote in a note dated today. The 189 clients in the monthly survey, who manage a total of $1 trillion in emerging-market assets, said they have also reduced their positions in interest- rate markets and corporate debt.

JPMorgan’s EMBI Global Index of emerging-market dollar debt has lost 1.98 percent since Dec. 31, the worst start of a year since 1995, as 10-year Treasury yields jumped to a 10-month high Feb. 14. South Korea’s won and Taiwan’s currency have lost about 2 percent this year against the dollar as the 16 percent decline in the yen over the past six months boosted concern that Asia will act to weaken their currencies to bolster exports.

“Special focus in this month’s survey centered on reactions to moves in U.S. Treasuries and the Japanese yen,” wrote the analysts.

About 25 percent of investors said they have or will reduce their holdings of Asian currencies, according to the survey. Investors have deepened their “underweight” positions in currencies, including the Indian rupee, won, Malaysian ringgit, Philippine peso and Thai baht, the survey showed.

To contact the reporter on this story: Ye Xie in New York at yxie6@bloomberg.net

To contact the editor responsible for this story: Emma O’Brien at eobrien6@bloomberg.net


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