Bund futures hold near two-month high before Fed meeting
LONDON Oct 29 (Reuters) - German Bund futures held near two-month highs on Tuesday as investors expected the Federal Reserve to keep its current level of monetary policy easing until early next year.
The Fed will start a two-day policy meeting later on Tuesday, the first since a 16-day U.S. government shutdown caused by political fighting over the budget earlier this month.
The shutdown is expected to weigh on the U.S. economic recovery and traders now expect the Fed to keep its bond-buying stimulus going until at least March, supporting Treasuries and Bunds, their top-rated peer. Many had earlier expected it to start trimming the massive programme in December.
Elwin de Groot, senior market economist at Rabobank in Utrecht, said any mention of political uncertainty in the Fed's statement would be enough to cement the current market expectations.
"We would expect them to signal that they are on hold, that they are not going to taper in the near term, but it's unlikely they will say that explicitly," de Groot said.
"But given the political uncertainties, the impact of the shutdown, the fact that the economy was slowing even before the shutdown, they will have to send a dovish signal."
Bund futures were flat at 141.15, keeping a two-month high of 141.23 hit on Monday in sight. Cash 10-year German yields were unchanged at 1.75 percent.
Some traders said the upcoming supply of triple-A rated debt was holding Bunds from climbing further. The U.S. will sell $35 billion of five-year notes on Tuesday and $29 billion of seven-year notes on Wednesday.
Finland will offer up to 1.5 billion euros of 2018 and 2042 bonds on Tuesday, while Germany will auction up to 4 billion euros of 10-year debt on Wednesday.
Other euro zone debt was also little changed.
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