November 20, 2017 / 2:08 PM / a month ago

TREASURIES-Yields inch higher, Fed meeting minutes in focus

    * Fed meeting minutes on Wednesday in focus
    * Treasury yield curve flattest since late 2007
    * Trading expected to be light before Thanksgiving

    By Karen Brettell
    NEW YORK, Nov 20 (Reuters) - U.S. Treasury yields inched
higher on Monday as investors awaited minutes on Wednesday from
the Fed’s last meeting, with no major economic releases due this
week and trading expected to be subdued before the Thanksgiving
holiday on Thursday.
    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.             
    The Fed’s meeting minutes will be evaluated for any new
indications that a rate hike is likely in December.
    "The highlight of the week should be the minutes on
Wednesday," said Justin Lederer, an interest rate strategist at
Cantor Fitzgerald in New York.
    Interest rate futures traders are pricing in a 92 percent
chance of a December rate hike, according to the CME Group’s
FedWatch Tool.
    Benchmark 10-year notes            were last down 2/32 in
price to yield 2.36 percent, up from 2.35 percent on Friday.
    The yield curve between two-year and 10-year notes
               also continued to flatten to 61 basis points, the
flattest level since late 2007.
    The yield curve has flattened as investors price in the
expectation that the Fed will continue to raise rates while the
U.S. Treasury is also expected to increase debt issuance, with a
focus on short- and intermediate-dated maturities.
    At the same time, low inflation and global demand for yield
has supported longer-dated debt.
    Yields brieflY fell earlier on Monday in line with German
government debt after German Chancellor Angela Merkel said her
efforts to form a three-way coalition government had failed.
    The development put Germany into its worse political crisis
for decades, raising the prospect of fresh elections and casting
doubt over Merkel's future.             

 (Reporting by Karen Brettell
Editing by Jonathan Oatis)
  
 
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