* Fed widely expected to pare bond purchases by $10 bln
* Analysts see Yellen tweaking forward guidance on rates
* Fed refrains from bond purchases before FOMC decision
By Richard Leong
NEW YORK, March 19 U.S. government debt prices
were little changed on Wednesday as investors waited for the
Federal Reserve to possibly change its guidelines on the timing
of raising interest rates as job growth remains sluggish and
inflation stays stuck below its target.
While the economy is far from robust, many Fed policy makers
have signaled the central bank will likely continue on its
current path to reduce stimulus, a move that began in December.
Economists widely anticipate the Fed will pare its monthly
purchases of Treasuries and mortgage-backed securities by $10
billion to $55 billion in April.
"The Fed is taking control of everyone's attention today,"
said Mike Cullinane, head of Treasuries trading at D.A. Davidson
in St. Petersburg, Florida. "It's pretty assured they will
continue to taper probably by another $10 billion."
In addition to shrinking its third round of quantitative
easing, or QE3, analysts expect the Fed to scrap its threshold
6.5 percent jobless rate and instead substitute a less specific
message about when it might move away its near-zero rate policy.
The Labor Department said the unemployment rate edged up to
6.7 percent in February from 6.6 percent. A year ago it was 7.7
With the focus on what the U.S. central bank will telegraph
in its statement at 2 p.m. (1800 GMT), most traders moved to the
sidelines with a few shaving their bond holdings in the face of
slightly higher equity prices.
Benchmark 10-year Treasury notes were unchanged
in price with a yield of 2.681 percent, just above its 200-day
moving average of 2.679 percent, according to Reuters data.
The 10-year yield has bounced in a 25 basis point range
since the previous meeting of the Federal Open Market Committee,
the central bank's policy-setting group, in January.
There have been sharp intraday swings in yields on
disappointing domestic data, although those figures were skewed
by harsh winter weather, and safe-haven bids on worries over a
war between Russia and the West over Ukraine.
Safety demand for Treasuries have faded in the past 48 hours
after Sunday's referendum in Crimea passed without major
violence. However, traders and analysts cautioned anxiety would
resurface if Russian President Vladimir Putin signaled intention
to intervene in other parts of Ukraine.
"It's moved off the front burner in people's mind for now,"
In addition to the FOMC statement, the Fed will release its
quarter economic forecasts which analysts will scour for insight
on policy-makers' latest views on the economy and how far apart
they might be on a rate hike, which is seen possible by the
middle of next year.
Traders are pricing in a 61 percent chance the FOMC will
lift the federal funds rate at its July 2015 meeting,
compared with a 58 percent chance a month ago, according to CME
Group's FedWatch that computes traders' expectations of
potential changes in the Fed's rate target.
At 2:30 p.m. (1830 GMT), Janet Yellen will hold her first
FOMC press conference as Fed chair, where reporters will likely
press her on the Fed's policy path and an economy slowed by
Meanwhile, the Fed will not purchase Treasuries for its QE3
program on Wednesday.
(Reporting by Richard Leong; Editing by Meredith Mazzilli)