TREASURIES-U.S. bonds little changed after Fed policy shift
LONDON Dec 19 (Reuters) - U.S. Treasuries held within recent ranges on Thursday after the Federal Reserve tempered news it would start scaling back its bond-buying program by signalling interest rates would stay lower for longer.
The Federal Reserve trimmed its monthly asset purchases by $10 billion to $75 billion but also said it was likely to keep rates near zero well past the time that the jobless rate falls below 6.5 percent, especially if inflation expectations remain below target.
"This package was quite neutral in terms of the overall accommodation from central bank policy," Rainer Guntermann, strategist at Commerzbank said.
Ten-year bond yields rose 1.3 basis points to 2.90 percent - at the top end of December's 2.75-2.93 percent range - and two-year yields were 1.6 bps higher at 0.35 percent.
Five-year bonds underperformed due to supply pressure, but some traders said the move in yield was exaggerated by a rollover of the benchmark. Five-year yields were 4.6 basis points higher at 1.60 percent.
In addition to the $35 billion in five-year debt sold on Wednesday, the Treasury will sell $29 billion in seven-year notes and $16 billion in five-year inflation-protected securities on Thursday.
Traders also said five-year bonds were vulnerable to selling because they were not covered by the timeframe implied in the suggestion that rates would remain near zero for longer.
Futures traders are betting the Federal Reserve will wait until September 2015 before raising rates.
"They know that over the next five years probably rate hikes may be coming - this probably explains while this medium part of the curve is reacting a bit more nervously," Guntermann added.
Thirty-year yields were 2.3 basis points lower at 3.89 percent.
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