* Fed sees inflation risks with Trump's fiscal
* Analysts view Fed minutes as less hawkish
(Adds comment, updates prices)
By Gertrude Chavez-Dreyfuss
NEW YORK, Jan 4 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
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)