LONDON Dec 12 U.S. Treasury prices fell on
Wednesday as investors made final adjustments to their positions
in anticipation of the Federal Reserve unveiling more stimulus
measures, a move that could boost equities and hurt bonds.
* The Federal Reserve's policy meeting, which concludes
later in the day, is expected to bring a fresh bond buying
programme, known as quantitative easing or 'QE', as the central
bank tries to boost a fragile U.S. economy.
* Although widely anticipated, the move could still bring
about a rally in equities that would put U.S. bonds under
pressure, particularly in the 10-year sector where the influence
of the Fed's low interest rate policy was less apparent.
* "We're getting curve steepening from selling of (10-year
debt) ahead of the Fed. This has to be the most nailed-on Fed QE
announcement ever," a trader said. "We're also getting a general
risk-on tone in Europe, where Greece looks to have got its debt
* Ten-year Treasury yields rose 1.6 basis points
to 1.67 percent, adding to a 4 basis point rise on Tuesday while
two-year yields were flat at 0.24 percent. Treasury
futures were 7/64 lower at 133-19/64, in line with a fall
in German Bund futures.
* The relatively muted moves reflected broad agreement in
the market about the fact that QE would be forthcoming and also
on the scale of the programme. Economists polled by Reuters
expect the Fed to announce $45 billion per month of bond buying.
* "If the total is within five billion of the 45 billion
consensus, there won't be much reaction... anything either side
of that would create a bit of a stir," said Monument Securities
strategist Marc Ostwald.
* Any selloff after the Fed announcement was also likely to
be kept in check by concern that policymakers must complete
tough negotiations to avoid the 'fiscal cliff' of
recession-inducing tax hikes and spending cuts next year.
* "The fiscal cliff is not going to get sorted this week and
the market didn't really get hit by the better jobs numbers on
Friday. I would be looking to buy a broader dip and still want
to be long this market, there's enough hurdles out there," the