LONDON Feb 20 U.S. Treasuries fell in Europe on Wednesday, tracking falls in German bonds after a weak auction but the market was seen rangebound before the release of minutes of the Federal Reserve's January policy meeting.
The market will be looking for clues from the minutes on the future of the central bank's bond buying plans after the Federal Open Market Committee last month left in place the $85 billion-a-month stimulus. The Fed said then it needed to support employment conditions even as it indicated a recent stall in U.S. economic growth was likely temporary.
Before the minutes, T-note futures were last 11/64 down at 131-11/64, dragged in the wake of German bond futures which extended losses after a sale of 4.04 billion euro of 10-year bonds drew bids only just covering the total amount issued.
"Supply out of the euro zone caused the market to cheapen up... We're seeing some selling in the belly (5- to 7-year maturities) of the curve," one trader said.
Benchmark 10-year T-notes were last 5/32 down in price to yield 2.04 percent, up 1.6 basis points from late U.S. trade.
The 10-year yield has been bouncing in a 20 basis point range in the past three weeks and market participants see little catalyst for now to break out of it, with activity subdued before the FOMC minutes.
"We are not seeing big moves today, because it's difficult to move ahead of the FOMC minutes," said Hiroki Shimazu, an economist at SMBC Nikko Securities in Tokyo.
"Markets will be watching for any information on the pace of purchasing Treasuries," he said.
The Fed will likely need to keep buying bonds until the end of this year given the still-feeble state of the U.S. labor market, Atlanta Fed President Dennis Lockhart told Reuters in an interview on Tuesday.
Economists are split over whether the central bank will stop buying bonds this year.