Bond investors brace for US slowdown

NEW YORK, March 18 (Reuters): Bond investors are bracing for a US economic downturn, as they pare back risky exposures, while many are extending duration in their fixed-income portfolios, taking in to account a Federal Reserve that is in no rush to resume cutting interest rates.

In the run-up to this week's two-day Federal Open Market Committee meeting, investors have been extending duration. That entails buying longer-dated assets in anticipation of a further decline in yields and suggests that the bond market is positioning for a deeper-than-anticipated rate-cutting cycle. Investors have been lengthening duration for the last month at least, market participants said.

J.P. Morgan's latest Treasury Client Survey showed bond investors having the largest net-long position on Treasuries since the autumn of 2010. The extreme overbought situation could be a contrarian indicator, however, suggesting a possible technical bounce for bond yields in the near term.

The bond market's long positioning is likely due in part to fears of recession, analysts said, as the Trump administration continued to pummel the United States' trading partners with aggressive import tariffs that set the stage for a global trade war.