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TREASURIES-Bonds steady before Yellen testimony
February 14, 2017 / 2:29 PM / 9 months ago

TREASURIES-Bonds steady before Yellen testimony

* Yellen to testify before Senate
    * Producer prices rise more than expected

    By Karen Brettell
    NEW YORK, Feb 14 (Reuters) - U.S. Treasuries were steady on
Tuesday as investors awaited testimony by Federal Reserve Chair
Janet Yellen for any new indication on when the U.S. central
bank is likely to next raise interest rates.
    Yellen gives her semiannual Humphrey Hawkins testimony
before lawmakers in Washington on Tuesday and Wednesday.
    Investors reduced expectations of a rate hike at the Fed's
March meeting after jobs data for January showed disappointing
wage growth. They will be watching to see if Yellen gives any
information on the Fed's likely near-term moves.
    "The market is in a holding pattern here, waiting to see if
she does give us more than we expect," said Thomas Simons, a
senior money market economist at Jefferies in New York.
    Uncertainty about President Donald Trump's planned tax and
spending reforms, which the White House has said will be
detailed over the coming weeks, may make Yellen reticent to
discuss any near-term action.
    "It wouldn't really make sense for her to make some kind of
proclamation on what they expect to do, given that the outlook
can change pretty significantly," Simons said.
    Benchmark 10-year notes were last down 2/32 in
price to yield 2.44 percent, up from 2.43 percent late on
Friday.
    Futures traders are pricing in a 13 percent likelihood of a
March rate hike, according to the CME Group's FedWatch Tool.
    Bonds had little reaction to data on Tuesday showing that
U.S. producer prices rose more than expected in January,
recording their largest gain in four years amid increases in the
costs of energy products and some services. 
    The indicator is seen as less important than other inflation
indexes as it gives often very different readings and aims to
measure volatile and difficult-to-observe price points, said
Simons. 
    "It's the most seemingly random of all the inflation
indexes," he said. "Over time the market takes it with less and
less importance." 
    Further economic releases, including consumer price
inflation, manufacturing and retail sales data, are also in
focus this week.
    Bond yields rose on Monday as stock markets rose to record
highs, reducing demand for safe-haven assets.

 (Editing by Lisa Von Ahn)

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