October 16, 2017 / 1:11 PM / 8 months ago

TREASURIES-Prices down after Yellen comments, stronger-than-expected data

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By Dion Rabouin

Oct 16 (Reuters) - U.S. Treasury prices dipped on Monday, weighed by comments over the weekend from Federal Reserve Chair Janet Yellen, and edged lower after the release of a stronger-than-expected report on manufacturing from the New York Federal Reserve.

Yellen said in remarks on Sunday that the U.S economy remains strong and the strength of the labor market calls for continued gradual interest rates increases despite subdued inflation readings for much of the year.

The speech suggested the U.S. central bank remains tied to its projection of three interest rate hikes this year, which would likely mean an increase at its December meeting.

The Fed announced at its last meeting that it would begin paring its $4.5 trillion of bond holdings this month.

“If the (Federal Open Markets Committee) is willing to ignore the disappointing string of core inflation figures seen during 2017 and continue delivering rate hikes, then the ‘mystery’ of inflation becomes more of an academic exercise than a market event,” said Ian Lyngen, head of U.S. rates strategy at BMO Capital Markets, in a note to clients.

The business conditions index published by the New York Fed showed its highest reading since September 2014.

Benchmark 10-year Treasury notes dropped 4/32 in price to yield 2.296 percent. (Reporting by Dion Rabouin; Editing by Nick Zieminski)

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