August 21, 2019 / 7:00 PM / 3 months ago

TREASURIES-Yields rise after Fed minutes, Powell speech in focus

 (Recasts with Fed minutes, adds quote, updates prices)
    * Fed wanted to avoid impression of further rate cuts
    * Fed policymakers debated deeper rate cut in July
    * Fed's Powell to speak on Friday

    By Karen Brettell
    NEW YORK, Aug 21 (Reuters) - Benchmark 10-year Treasury
yields rose off session lows on Wednesday after minutes from the
Federal Reserve’s July meeting showed that policymakers were
united in wanting to avoid the appearance of being on the path
to further rate cuts.
    The U.S. central bank cut rates by 25 basis points at the
close of its July 30-31 meeting, with minutes for the meeting
published on Wednesday showing broad concern among policymakers
over a global economic slowdown, trade tensions and sluggish
inflation.
    A couple of participants wanted a 50 basis point cut at the
July meeting, but policymakers agreed that they did not want to
give the impression they were planning more rate cuts.
            
    A speech by Fed Chairman Jerome Powell on Friday is 
expected to offer further clarity for market participants as
yields have plunged since the July meeting and the two-year,
10-year yield curve inverted, signaling that a recession is
likely in one to two years.
    “It’s really old news," said Mary Ann Hurley, vice president
in fixed income trading at D.A. Davidson in Seattle. "What
Powell has to say on Friday is going to be much, much more
important than these minutes.” 
    Benchmark 10-year notes             fell 5/32 in price to
yield 1.576%, up from 1.559% late on Tuesday.
    The two-year, 10-year yield curve                flattened
to one basis point. It briefly inverted last week, before moving
back into positive territory.
    Bond market participants have been at odds with the Fed’s
economic outlook, after it said at its July meeting that future
rate cuts may not be needed.
    “The market is still acting as though they are behind the
curve,” said Lou Brien, a market strategist at DRW Trading in
Chicago.
    Interest rate futures traders are pricing in a 100%
probability of a rate cut at the Fed’s September meeting, a 75%
chance of an additional cut in October, and a 48% likelihood of
another cut in December, according to the CME Group’s FedWatch
tool.

 (Reporting by Karen Brettell; Editing by Steve Orlofsky)
  
 
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