November 22, 2017 / 2:18 PM / a year ago

TREASURIES-Bonds steady before Fed meeting minutes

    * Fed meeting watched for signs of Dec rate hike
    * Durable goods orders fell in October

    By Karen Brettell
    NEW YORK, Nov 22 (Reuters) - U.S. Treasury yields were
steady on Wednesday before the Federal Reserve is due to release
minutes from its latest meeting, with trading volumes seen
subdued before Thursday’s Thanksgiving holiday.
    The Fed’s meeting minutes will be evaluated for any new
indications that a rate hike is likely in December, with market
participants seeing the rate hike as all but certain.
    “The expectation for a move in December is very solid,” said
Lou Brien, a market strategist at DRW Trading in Chicago.
    Interest rate futures traders are pricing in a 92 percent
chance of a December rate hike, according to the CME Group’s
FedWatch Tool.
    The Treasury yield curve, however, was seen as reflecting
concerns about long-term growth and inflation even as the U.S.
central bank continues its path towards normalizing monetary
    “Inflation is not playing along with the pace of
normalization and so the confidence that the market is putting
on a rate hike with the PCE core at levels that are as low as
they’ve been in a couple of years, means that the yield curve
should flatten,” Brien said.
    The core personal consumption expenditures (PCE) price index
has consistently undershot the Fed's 2 percent target for more
than five years.
    The U.S. central bank kept interest rates unchanged when it
concluded its two-day meeting on Nov. 1 and pointed to solid
U.S. economic growth and a strengthening labor market while
playing down the impact of recent hurricanes.             
    Benchmark 10-year notes             were last up 1/32 in
price to yield 2.36 percent, little changed from Tuesday.
    The yield curve between two-year notes and 10-year notes
               steepened to 60 basis points, after falling to
57.4 basis points on Tuesday, the flattest level since late
    Yields briefly fell after data showed that new orders for
key U.S.-made capital goods unexpectedly fell in October after
three straight months of hefty gains, but a sustained increase
in shipments pointed to strong momentum in the economy as the
year winds down.             

 (Editing by Susan Thomas)
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