July 30, 2019 / 1:43 PM / in 25 days

TREASURIES-U.S. bond yields edge up ahead of Fed meeting

 (Updates trading, adds quote, table, graphic)
    By Richard Leong
    NEW YORK, July 30 (Reuters) - U.S. Treasury yields edged up
on Tuesday in advance of a Federal Reserve policy meeting, where
traders widely expect key lending rates to be lowered for the
first time in a decade to prolong the longest-ever U.S. economic
expansion.
    Traders awaited signals on whether the U.S. central bank
will offer an insurance rate-cut to combat risks from ongoing
trade tensions or is prepared to lower borrowing costs a number
of times in anticipation of an economic downturn.
    "The market is treading water until we get clarification
from the Fed on what it's going to do," said Sean Simko, head of
global fixed income management at SEI Investments Co. 
    U.S. interest rates futures suggested traders are fully
positioned for a rate cut on Wednesday with an expected 77%
chance of a quarter-point decrease and a 23% probability of a
half-point reduction, according to CME Group's FedWatch program.

    Federal funds contracts implied traders expect at least one
more quarter-point cut by year-end if the Fed lowers rates on
Wednesday.
    The Fed will release its rate decision at 2 p.m. (1800 GMT)
on Wednesday, followed by a press conference with Fed Chairman
Jerome Powell half an hour later.
    At 9:18 a.m. (1318 GMT), the yield on benchmark 10-year
government notes was down 0.1 basis point at 2.053%.
    The benchmark 10-year yield has risen over 5 basis points
this month after hitting 1.939% on July 3, which was its lowest
level since November 2016.
    On the data front, the Commerce Department said U.S.
consumer spending rose 0.3% in June, matching analyst forecasts
and allaying some worries about a sharp deceleration in economic
growth.
    While core consumer prices grew last month, the
year-over-year increase as measured by the core rate of personal
consumer expenditure remained subdued at 1.6%, below the Fed's
2% goal.
    "The goal is about generating that inflation pressure,"
Simko said of possible rate-cuts from the Fed.
July 30 Tuesday 9:29AM EDT/ 1329 GMT
                               Price                   
 US T BONDS SEP9               154-28/32    0-3/32     
 10YR TNotes SEP9              127-108/256  -0-8/256   
                               Price        Current    Net
                                            Yield %    Change
                                                       (bps)
 Three-month bills             2.065        2.1106     0.003
 Six-month bills               2.0325       2.0822     -0.006
 Two-year note                 99-206/256   1.8499     0.000
 Three-year note               99-210/256   1.8126     0.003
 Five-year note                99-150/256   1.8371     0.003
 Seven-year note               99-160/256   1.9325     0.003
 10-year note                  102-212/256  2.0545     0.000
 30-year bond                  106-68/256   2.5725     -0.010
                                                       
   DOLLAR SWAP SPREADS                                 
                               Last (bps)   Net        
                                            Change     
                                            (bps)      
 U.S. 2-year dollar swap         2.75         0.50     
 spread                                                
 U.S. 3-year dollar swap         0.00         0.25     
 spread                                                
 U.S. 5-year dollar swap        -3.00         0.25     
 spread                                                
 U.S. 10-year dollar swap       -8.00         0.25     
 spread                                                
 U.S. 30-year dollar swap      -36.75         0.50     
 spread                                                
 
    

    
 (Reporting by Richard Leong; Editing by Steve Orlofsky and
Bernadette Baum)
  
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