Bonds flat as investors wait for Fed decision

By Chris Reese

NEW YORK (Reuters) - U.S. Treasury debt prices were little changed on Wednesday as early price momentum on data showing weak consumer spending and business investment was later sapped by surging stocks.

Investors were also wary of radically shifting bond prices ahead of expectations the Federal Reserve will cut interest rates by 25 basis points on Wednesday afternoon, although many also expect the central bank may signal a pause in the recent monetary loosening campaign.

An initial report on first-quarter U.S. gross domestic product was stronger than expected, rising at a 0.6 percent annual rate, which was equal to fourth-quarter growth and above economists' expectations for a 0.2 percent rise.

Investors focused on details within the report however, including first-quarter consumer spending that was the weakest since the second quarter of 2001, when the economy was last in recession.

Business investment also posted its biggest drop since the first quarter of 2004, while the drop in housing investment was the largest since the fourth quarter of 1981.

"Nothing in this morning's economic reports changes our view of an economy mired in recession," said Scott Anderson, senior economist at Wells Fargo Economics in Minneapolis.

While bonds traded higher after the GDP data, a late-morning surge in stocks knocked debt prices back to near-level, with the benchmark 10-year Treasury note trading 1/32 higher in price for a yield of 3.82 percent from 3.82 percent late on Tuesday.

The 2-year Treasury note was trading flat in price for a yield of 2.38 percent.