(Inserts dropped words 'in the' in first paragraph)
* FOMC minutes don't alter view on 2nd-half 2015 rate hike
* Fed reveals details on possible use of new policy tools
* Fed signals end of bond purchases in October
* U.S. sells 10-year note supply at lowest yield in 13
By Richard Leong
NEW YORK, July 9 U.S. Treasuries prices rose on
Wednesday as the Federal Reserve acknowledged the recent
strengthening in the U.S. economy in the minutes of its June
meeting but suggested it was unlikely to raise policy rates
until the second half of 2015.
The bond market eked out a third day of price gains in
choppy trading even after a poor $21 billion 10-year note
auction. This week's $61 billion in fixed-rate note supply will
conclude with a $13 billion auction of 30-year bonds.
"We need the Fed to change its tune on its monetary policy
outlook in order for interest rates to go up," said Michael
Materasso, co-chairman of the fixed income policy committee at
Franklin Templeton in New York.
In its June 17-18 meeting minutes, the Federal Open Market
Committee, the Fed's policy-setting group, further discussed the
use of interest on excess reserves and fixed-rate reverse
repurchase agreements to help achieve its target interest rate
when it decides to tighten policy.
In the meantime, policymakers signaled they wanted to stop
purchases of Treasuries and mortgage-backed securities in
October. They started to pare the Fed's third round of
quantitative easing in January.
Demand for Treasuries has been underpinned by worries about
corporate earnings, weak overseas economic data, as well as the
intensified fighting between militants in Gaza and the Israeli
Expectations that the European Central Bank might engage in
more stimulus to help its struggling economy have also fed
demand for Treasuries that are yielding more than German Bunds.
"What the ECB is doing is having a big effect" on
Treasuries, said Eric Stein, co-director of global income group
at Eaton Vance Management in Boston.
Benchmark 10-year Treasuries finished 3/32
higher in price at a yield of 2.5539 percent, down 1 basis point
from Tuesday. The 10-year yield traded in a 6 basis point range.
The 30-year bond ended up 7/32 in price for a
3.369 percent yield, down 1 basis point. The 30-year yield
bounced between 3.358 to 3.397 percent.
Among shorter maturities, the yield on three-year notes
climbed above 1 percent for the first time since May
2011 before falling below that threshold at 0.9783 percent in
Before the FOMC minutes, the Treasury Department held the
second reopening of the 10-year issue introduced in May. It was
sold at a 2.597 percent yield, the lowest since
Overall results of the 10-year sale suggested below-average
demand for the maturity with direct bidders buying their
smallest share since January.
(Editing by Jeffrey Benkoe and Nick Zieminski)