March 20, 2017 / 6:57 PM / in 10 months

TREASURIES-Prices gain as Fed seen unlikely to accelerate rate hikes

 (Recasts with price action, adds Fed comments, quotes, updates
    * Fed officials dominate weekly calendar
    * Fed's Evans sees two more hikes this year
    * Markets downplay risk of faster rate hikes

    By Karen Brettell
    NEW YORK, March 20 (Reuters) - U.S. Treasury prices gained
on Monday as Chicago Federal Reserve President Charles Evans
reiterated the U.S. central bank's view that two more interest
rate hikes this year are likely, disappointing investors who had
anticipated a faster path of rate increases.
    Evans' public comments were among the first since the U.S.
central bank lifted its policy rate a notch last week, as
    Yields have fallen since the Fed's meeting on Wednesday.
Some investors had anticipated the Fed would take a more hawkish
tone on raising rates on expectations of stronger growth.
    "After last week, investors understood that the Fed’s not
quite as hawkish as they anticipated and what you’re seeing now
is a little bit of capitulation," said Gennadiy Goldberg, an
interest rate strategist at TD Securities in New York. "You’re
seeing the markets reprice for a more benevolent Fed." 
    Benchmark 10-year notes             were last up 7/32 in
price to yield 2.48 percent, down from 2.50 percent on Friday.
    The Fed last week reiterated that future rate increases
would be "gradual." At the current pace, rates would not return
to a neutral level until the end of 2019.             
    Evans also said on Monday that the Fed will  likely wait at
least until a June policy meeting to decide whether to lift U.S.
interest rates again, giving it time to digest economic and
financial market data as well as any clarity on the Trump
administration's fiscal policy plans.             
    Investors have been adjusting for the possibility of faster
economic growth on the view that President Donald Trump will
implement new fiscal stimulus. 
    The lack of details on fiscal policy as the Trump
administration focuses on domestic issues, however, has led to a
pause in the bond selloff.
    "We need to see more clarity on the fiscal front in order
for longer-end yields to move higher," Goldberg said.
    Speeches from a plethora of Fed officials are expected to
dominate trading this week.
    “We have a light week for data, we have no nominal coupon
supply either, so really the tone of the market is going to
follow what we see from the Fed speakers,” said Thomas Simons, a
senior money market economist at Jefferies in New York.
    Fed Chair Janet Yellen is due to speak at a community
development conference on Thursday.
    Kansas City Fed President Esther George, Cleveland Fed
President Loretta Mester and Boston Fed President Eric Rosengren
will all speak on Tuesday.

 (Editing by Meredith Mazzilli and Jonathan Oatis)
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