* Fed expected to announce decision at 2 p.m. ET (1900 GMT)
* Turkey central bank rate hike impact faded
* Prices supported by expectations for low short-term rates
By Sam Forgione
NEW YORK, Jan 29 U.S. Treasuries prices rose on
Wednesday on expectations that a further pullback in the U.S.
Federal Reserve's bond-buying would cause more pain for emerging
market assets, leading investors to favor safe-haven bonds.
The impact of Turkey's interest rate hike during a midnight
policy meeting to defend its battered lira currency quickly
faded as traders sold riskier emerging market assets and bought
Treasuries ahead of the Fed's decision, due at 2 p.m. ET.
"As they taper, they're taking away the punchbowl, and that
affects risky assets," said Kathy Jones, fixed income strategist
at Charles Schwab in New York. "People go to Treasuries when the
world is in this sort of turmoil."
At its two-day policy meeting that began Tuesday, the Fed is
considering whether to further scale back its bond-purchase
program, which is aimed at holding down long-term borrowing
costs to help the economy. The low interest rates have fueled
demand for riskier, higher-yielding assets.
In December, the Fed reduced its monthly purchases of
Treasuries and mortgage-backed securities by $10 billion to $75
billion. Some analysts expect the Fed will cut purchases by
another $10 billion this week.
Treasury prices also rose despite incoming supply. The U.S.
Treasury Department debuted $15 billion in two-year floating
rate notes on Wednesday, and will sell $35 billion
in five-year notes and $29 billion in seven-year
debt on Thursday.
Benchmark 10-year Treasury notes were last up
9/32 in price to yield 2.715 percent, up in price from a yield
of 2.748 percent late on Tuesday. Bond yields move inversely to
While the Fed is expected to further trim its monthly asset
purchases, expectations that the Fed will keep short-term
interest rates low also reinforced the gains in Treasuries.
"Since data has been weaker than expected, the Fed will
remain dovish and keep the Fed funds rate low, which has
supported Treasury prices today," said Tanweer Akram, senior
economist at ING U.S. Investment Management in Atlanta.
The Commerce Department reported on Tuesday that orders for
long-lasting U.S. manufactured goods fell by 4.3 percent in
The Fed has kept the Federal funds rate, its benchmark
short-term borrowing rate, at 0 to 0.25 percent since late 2008
to help the economy recover from recession, and it has promised
to keep it there for a while longer, probably until 2015.
On Wall Street, the three major stock indexes dipped, with
the benchmark Standard & Poor's 500 stock index falling