BOND REPORT: Treasury Yields Mostly Higher As Fed Meeting Gets Under Way
March 19 2019 - 04:30PM
Dow Jones News
By Sunny Oh
Traders aren't expecting any rate increases this year
Treasury yields rose slightly Tuesday as a Federal Reserve
meeting kicked off, which could show policy makers scaling back
rate-hike projections and outlining a plan to end a runoff of its
asset portfolio, amid growing skepticism that rates will be hiked
further in 2019.
The 10-year Treasury note yield was up 0.9 basis point to 2.614%
The 2-year note yield rose 1.2 basis points to 2.471%, while the
30-year bond yield picked up 1.3 basis points to 3.027%. Bond
prices move inversely to yields.
The gathering of the rate-setting Federal Open Market Committee
is expected to produce no rate moves; however, it the FOMC is
expected to trim its growth and inflation forecasts, and to lower
its quarterly projections for interest rates.
The Fed's policy statement will be closely scrutinized for
remarks on the economic outlook. Analysts say the central bank may
use March's meeting to outline what the central bank needs to see
to move out of its newfound patient stance on rate moves.
"This is an opportunity to set the parameters around the pause.
Its an opportunity to articulate what it will take to shift out of
this patient regime," said Ed Al-Hussainy, a senior rates
strategist for Columbia Threadneedle.
The fed-fund futures market, where traders can bet on
interest-rate changes, indicates around 65% of market participants
expect the central bank to stand pat between 2.25% to 2.50% for the
rest of 2019, with the rest expecting a cut, CME Group data
shows.
"After an about-face at the start of the year with the tone of
the committee shifting from aggressive to patient, the market read
the change to mean no further policy adjustments...This week we
will see if committee members too have adjusted their expectations
for additional rate hikes," wrote Lindsey Piegza, chief economist
for Stifel.
The Wall Street Journal reported that U.S.-China trade talks
were in its final stages
(https://www.wsj.com/articles/lighthizer-mnuchin-to-travel-to-beijing-11553015413?mod=hp_lead_pos2),
and that U.S. Trade Representative Robert Lighthizer and Treasury
Secretary Steven Mnuchin would fly to Beijing next week, according
to sources familiar with the matter. But a Bloomberg News report
said
(https://www.bloomberg.com/news/articles/2019-03-19/some-u-s-officials-see-china-walking-back-trade-pledges?srnd=premium)
Chinese officials may attempt to roll back some concessions.
In economic data, factory orders rose 0.1% in January
(http://www.marketwatch.com/story/us-factory-orders-edge-up-01-in-january-point-to-slower-economy-2019-03-19),
another piece of economic data pointing to softening growth in the
first quarter.
Australian bonds rallied after the Reserve Bank of Australia's
minutes from the March meeting
(https://www.rba.gov.au/monetary-policy/rba-board-minutes/2019/2019-03-05.html)
added to concerns over slowing economic activity, strengthening
expectations for an interest-rate cut. The 10-year Australian
government bond yield fell around 4 basis points to 1.93%, Tradeweb
data show.
(END) Dow Jones Newswires
March 19, 2019 16:15 ET (20:15 GMT)
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