May 2, 2017 / 1:17 PM / 4 months ago

TREASURIES-Yields rise as investors wait on Fed decision

    * Fed meeting statement due out Wednesday in focus
    * Treasury refunding watched for signs of ultra-long bond

    By Karen Brettell
    NEW YORK, May 2 (Reuters) - U.S. Treasury yields rose on
Tuesday as investors waited on the conclusion of the Federal
Reserve’s two-day meeting on Wednesday for any clues on when the
U.S. central bank is next likely to raise interest rates.
    The Fed is expected to keep interest rates steady after
hiking them in March, but investors were waiting to see if the
central bank may indicate that a new increase is likely at its
June meeting.
    Futures traders are pricing in a 71 percent chance of a rate
hike in June, according to the CME Group’s FedWatch Tool.
    Investors are also looking for details on how and when the
Fed may begin reducing the size of its bond holdings.
    “I think that the market is anticipating that they leave the
door open for a June move and maybe some hints about what’s
going on with the balance sheet,” said Ian Lyngen, head of U.S.
rates strategy at BMO Capital Markets in New York.
    Benchmark 10-year notes             were last down 3/32 in
price to yield 2.34 percent, up from 2.33 percent late on
Monday.
    Friday’s employment report for April is also a key focus and
will be evaluated for signs of whether jobs growth is strong
enough to encourage the Fed to raise rates again in the
near-term.
    Employers are expected to have added 185,000 jobs in the
month, according to the median estimate of 75 economists polled
by Reuters. It will come after jobs gains unexpectedly dropped
to 98,000 in March, the fewest since last May.         
    The Treasury is also due to announce its funding needs for
the coming two quarters on Wednesday, with traders focused on
whether the government gives any new details on possible plans
for longer-dated bonds.
    “There’s been a lot of chatter about what the potential is
for an ultra-long bond,” said Lyngen. “We don’t expect that we
will actually see an announcement but we should get some more
color on what people are thinking.”
    Treasury Secretary Steven Mnuchin repeated in an interview
with Bloomberg on Tuesday that issuing debt exceeding 30-years
in maturity "can absolutely make sense."
    The government will also announce on Wednesday how much it
plans to sell in three-year notes, 10-year notes and 30-year
bonds next week.

 (Editing by Bernadette Baum)
  
 
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