January 4, 2017 / 8:47 PM / 8 months ago

TREASURIES-Yields flat to lower after uncertain tone in Fed minutes

* Fed sees inflation risks with Trump's fiscal stimulus-minutes

* Analysts view Fed minutes as less hawkish (Adds comment, updates prices)

By Gertrude Chavez-Dreyfuss

NEW YORK, Jan 4 (Reuters) - U.S. Treasury debt yields were flat to slightly lower in choppy trading on Wednesday after minutes of the last Federal Reserve meeting struck a more uncertain tone than the market expected, especially with respect to the new administration's fiscal policies.

Yields on U.S. 10-year notes and 30-year bonds hit session lows following the release of the Fed minutes on monetary policy. Many were expecting an overly hawkish stance after the Fed raised interest rates for the first time in a year.

"The broad anticipation was for hawkish thinking in particular with regard to inflation risk," said Jim Vogel, interest rate strategist, at FTN Financial in Memphis.

"But instead it turned out that the meeting talked a great deal about how to anticipate and plan for potential fiscal stimulus. That was something that (Fed Chair) Yellen appeared to downplay in the December press conference."

The minutes of the Dec. 13-14 meeting showed many were considering faster interest rate increases as the economy could grow at a quicker pace because of fiscal stimulus under President-elect Donald Trump's administration.

At the same time, the minutes also spelled out the downside risks which could limit economic growth such as trade barriers, the dollar's appreciation, and uncertainty on fiscal measures.

"We get the sense that the Fed may be content remaining on the sidelines until there is more clarity on the economic impact from the incoming administration's policies, which based on its opaque approach to announcing priorities, will take some time to tease out," said Marvin Loh, global market strategist, at BNY Mellon in Boston.

In late trading, the U.S. 10-year note was flat in price to yield 2.451 percent, compared with 2.454 percent late on Tuesday.

U.S. 30-year bond prices were up 1/32, yielding 3.043 percent, down from Tuesday's 3.05 percent.

U.S. two-year note prices were flat, yielding 1.230 percent . The yield was at 1.234 percent before the Fed minutes.

Analysts also said the overall bias of the market was for higher Treasury yields amid what is known as "rate-lock selling" during an expected heavy corporate issuance calendar this month.

Wall Street dealers typically lock in borrowing costs for corporate bonds they are underwriting by selling Treasuries as a hedge before the deal is completed. Once the bond is sold, the dealer buys back Treasuries to exit the rate-lock. (Reporting by Gertrude Chavez-Dreyfuss; Editing by Alan Crosby and Andrew Hay)

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