November 20, 2017 / 7:38 PM / 24 days ago

TREASURIES-Yields rise, Fed meeting minutes in focus

 (Adds quotes, updates prices)
    * 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 rose 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            fell 5/32 in price to
yield 2.37 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
lowest 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 expected to increase debt issuance with a focus
on short- and intermediate-dated maturities.
    "The flattening that we’ve seen over the last couple of
months is a long-term trend move, it’s the idea that the Fed is
going to continue to raise rates," said Thomas Simons, a money
market economist at Jefferies in New York.
    At the same time, low inflation and global demand for yield
has supported longer-dated debt.
    "We still have a relatively low inflation environment and we
have global investors that are still looking at our curve as
presenting relative value," Simons said.
    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 worst political crisis
for decades, raising the prospect of fresh elections and casting
doubt over Merkel's future.             

 (Editing by Lisa Shumaker)
  
 
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