September 19, 2017 / 1:36 PM / 10 months ago

TREASURIES-Prices gain before two-day Fed meeting

    * Fed meeting statement on Wednesday in focus
    * Data shows boost in U.S. import prices

    By Karen Brettell
    NEW YORK, Sept 19 (Reuters) - U.S. Treasury prices gained
slightly on Tuesday but yields held within a tight range as
investors waited on the conclusion of the Federal Reserve’s
two-day policy meeting for new indications on whether an
additional interest rate hike is likely this year.
    The U.S. central bank is widely expected to announce on
Wednesday that it will begin paring its bond holdings, with
reductions likely to start in the coming months.
    Investors will also be watching for signals that the Fed
will raise interest rates in December, in addition to any
clarity on personnel changes as Fed Chair Janet Yellen’s
term-end approaches and after the resignation of Vice Chair
Stanley Fischer earlier this month.
    “We will see what Yellen has to say at the press conference
regarding the balance sheet, regarding rates, regarding
Fischer’s resignation and her term, and see how the market takes
it,” said Justin Lederer, an interest rate strategist at Cantor
Fitzgerald in New York.
    Benchmark 10-year notes             were last up 3/32 in
price to yield 2.22 percent, from 2.23 percent late on Monday.
    Treasury yields briefly rose on Tuesday after data showed
that U.S. import prices recorded their biggest increase in seven
months in August as the cost of petroleum surged and there were
also signs of a pickup in underlying imported inflation.
    Expectations that the Fed may raise rates in December have
increased since data last Thursday showed that U.S. consumer
prices accelerated in August.             
    Interest rate futures traders are pricing in a 58-percent
chance of a rate hike in that month, according to the CME
Group’s FedWatch Tool.

 (Editing by Nick Zieminski)
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