* Prices steady, investors focused on Wednesday's Fed
* Bonds yields briefly rise on Empire State data
* Fed will buy $4.75 bln-$5.75 bln notes due 2018-2019
By Karen Brettell
NEW YORK, June 17 U.S. Treasuries were largely
flat on Monday as investors looked ahead to a key meeting of the
Federal Reserve, concluding on Wednesday, that will be
scrutinized for clarity about whether the U.S. central bank is
close to paring back on its bond purchase program.
Wednesday's announcement, to be followed by a press
conference with Ben Bernanke, has taken on a greater
significance since the Fed chairman said last month that the
U.S. central bank may decide to pare purchases in the next few
meetings if the economy gains maintains momentum.
The comments sparked a surged in Treasuries yields and a
dramatic uptick in volatility as investors evaluated the effect
if the Fed stops expanding its balance sheet.
"It's all about the Fed. You're going to continue to see
extreme volatility around these Fed meetings just because of
what the Chairman has stated," said Dan Mulholland, managing
director in Treasuries trading at BNY Mellon in New York.
Many economists see the economy on a stronger footing that
will enable to Fed to pull back some of its stimulus. Most
economists expect the Fed will reduce its purchase program by
the end of year and a large number expect less buying as early
as September, according to a Reuters poll.
At the same time, a number of traders and investors are also
concerned that ongoing purchases are creating market
dislocations that will make an exit harder and adding to risks
that the Fed will create new asset price bubbles.
A Wall Street Journal article on Thursday stating that the
Fed is unlikely to end all of its purchases at once, and is
still far away from raising rates, prompted a strong Treasuries
rally and pushed back expectations of tapering.
"We were priced for imminent tapering this summer, and
that's now been pushed back to year end or first quarter of next
year," said Mulholland.
Benchmark 10-year Treasuries were last unchanged
in price to yield 2.13 percent. They had fallen from a more than
13-month high of 2.29 percent last Tuesday, but remain
significantly higher than the 1.60 percent area they traded at
in early May.
Thirty-year bonds fell 4/32 in price to yield
3.31 percent, down from a more than 13-month high of 3.43
percent last Tuesday, and up from 2.82 percent at the beginning
The Fed will purchase between $4.75 billion and $5.75
billion in notes due 2018 and 2019 on Monday as part of its
Treasuries prices earlier briefly fell and yields rose after
data showed that growth in the New York state manufacturing
sector picked up in June, though the details showed a
contraction in new orders and measures of employment weakened.