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TREASURIES-Bonds steady ahead of refunding announcement, Fed meeting
October 31, 2017 / 6:55 PM / 18 days ago

TREASURIES-Bonds steady ahead of refunding announcement, Fed meeting

 (Adds consumer confidence, wage data; Updates prices)
    * Treasury expected to announce larger auction sizes
Wednesday
    * Fed meeting, possible tax bill in focus

    By Karen Brettell
    NEW YORK, Oct 31 (Reuters) - U.S. Treasury debt prices were
steady on Tuesday as investors awaited a heavy calendar of
events that market participants expected could prompt volatile
prices moves for the rest of the week.
    On Wednesday the Treasury Department will release its
refunding plans, the Federal Reserve will conclude its two-day
policy meeting and Republican lawmakers may introduce a bill to
cut taxes.
    The Treasury’s refunding announcement will be watched
because the government is expected to increase the size of its
regular auctions as it faces higher funding needs from a
widening deficit and as the Fed reduces its balance sheet.
    “We expect to see the first increases in coupon auction
sizes since 2009,” said Michael Cloherty, head of U.S. rates
strategy at RBC Capital Markets in New York.
    “There will likely be a lot of focus on the supply change,
both because they are very large going forward and because
global central banks are backing away from markets,” Cloherty
said.
    Benchmark 10-year notes             were last down 1/32 in
price to yield 2.37 percent, little changed on the day.
    Long-dated bond yields fell on Monday after Bloomberg quoted
Treasury Secretary Steven Mnuchin saying that the government
does not see a lot of demand for ultra-long bonds, reducing
expectations that the government will introduce a new ultra-long
issue.
    The yield curve between five-year notes and 30-year bonds
               flattened to 86.50 basis points on Tuesday, from
88.20 basis points on Monday.
    The U.S. central bank is expected to leave interest rates
unchanged when it concludes its two-day policy meeting on
Wednesday, but investors will be watching for any new
indications that a rate hike is likely in December.
    Vice President Mike Pence will meet with lawmakers on
Capitol Hill on Tuesday as Republicans grappled with key
provisions in the tax cut bill and lobbyists expressed concern
that a bill might not be ready by a self-imposed deadline of
Wednesday.             
    President Donald Trump is expected to announce his choice
for new Fed chair on Thursday, with news reports indicating that
Federal Reserve Governor Jerome Powell is likely to get the
nomination.             
    Economic data is also in focus with manufacturing data on
Wednesday and the non-farm payrolls report for October on
Friday.
    Yields briefly rose on Tuesday after U.S. consumer
confidence jumped to a near 17-year high in October.
    The economy's prospects were further bolstered by other
reports on Tuesday showing an acceleration in wage growth in the
third quarter and sustained increases in house prices in August.
            

 (Editing by Chizu Nomiyama)
  
 
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