January 30, 2013 / 6:46 PM / 5 years ago

TREASURIES-Prices dip again ahead of Fed decision

* Fed to end two-day meeting, focus on statement
    * U.S. GDP shows unexpected contraction in fourth quarter
    * Treasury sells $29 billion of 7-year notes

    By Luciana Lopez
    NEW YORK, Jan 30 (Reuters) - Prices for U.S. Treasuries fell
for a fifth day on Wednesday ahead of the end of a two-day
Federal Reserve meeting, as investors pushed for price
concessions amid auctions of $99 billion of U.S. government debt
this week.
    While Treasuries briefly moved higher after data showed a
surprise contraction in the world's biggest economy in the
fourth quarter, analysts said the figures would do little to
budge the Fed from its easy policy stance. 
    "This report doesn't have immediate implications for Fed
policy. They will be unhappy with it, but it's one quarter's
number," said Terry Sheehan, economic analyst with Stone &
McCarthy Research Associates in Princeton, New Jersey.
    Investors are now awaiting the Fed's statement at the
conclusion of the bank's two-day meeting later in the day. The
Fed is expected to keep monetary policy on a steady path, though
behind the scenes intensive debate continues over when it should
curtail its controversial bond-buying program. 
    "They may change a couple of characterizations of how
financial conditions are in Europe and things of that nature,
but we're really not looking for any significant changes at
all," said Rajiv Setia, head of U.S. rates research at Barclays.
    But he added that data might not be enough to support the
move higher in yields this month.
    "Things are getting better, but I just don't think they're
going to be good enough to sustain this increase in yields,"
Setia said.
    Still, any hints in the Fed statement that policymakers are
growing nervous about easing could prompt more selling, as
happened after the Fed's December meeting minutes were released
on Jan. 3.
    The Treasury on Thursday sold $29 billion of seven-year
notes, after having sold $35 billion of two-year notes on Monday
and $35 billion of five-year notes on Tuesday. Investors
typically try to push Treasuries prices down around the time of
such auctions.
    Benchmark 10-year notes were trading 7/32 lower
in price to yield 2.024 percent, up from 2.001 percent late
    Yields on benchmark notes have been testing the 2 percent
level since Monday, breaching that figure for the first time
since April. But yields did not get traction above that level
until Wednesday, helped by a bump in risk appetite in Asian
trading overnight.
    Investors are also awaiting for nonfarm payrolls data on
Friday. The Fed wants the unemployment rate to drop closer to
6.5 percent from the current 7.8 percent.

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