August 21, 2019 / 8:24 PM / a month ago

TREASURIES-Yields rise after Fed minutes, Powell speech in focus

    * Fed wanted to avoid impression of further rate cuts
    * Fed policymakers debated deeper rate cut in July
    * Fed's Powell to speak on Friday

 (Adds yield curve inversion, updates prices)
    By Karen Brettell
    NEW YORK, Aug 21 (Reuters) - Benchmark 10-year Treasury
yields rose off session lows on Wednesday after minutes from the
Federal Reserve's July meeting showed that policymakers were
united in wanting to avoid the appearance of being on the path
to further rate cuts.
    The U.S. central bank cut rates by 25 basis points at the
close of its July 30-31 meeting, with minutes for the meeting
published on Wednesday showing broad concern among policymakers
over a global economic slowdown, trade tensions and sluggish
inflation.
    A couple of participants wanted a 50 basis point cut at the
July meeting, but policymakers agreed that they did not want to
give the impression they were planning more rate cuts.

    A speech by Fed Chairman Jerome Powell on Friday is 
expected to offer further clarity for market participants as
yields have plunged since the July meeting and the
2-year/10-year yield curve inverted, signaling that a recession
is likely in one to two years.
    The minutes were "really old news," said Mary Ann Hurley,
vice president in fixed income trading at D.A. Davidson in
Seattle. "What Powell has to say on Friday is going to be much,
much more important than these minutes." 
    Benchmark 10-year notes fell 5/32 in price to
yield 1.576%, up from 1.559% late on Tuesday.
    The 2-year, 10-year yield curve briefly
inverted for the first time in a week in late afternoon trading,
by as much as 0.20 basis point. The spread steepened a little
bit after the inversion and was last at 1.1 basis point.
    Bond market participants have been at odds with the Fed's
economic outlook, after it said at its July meeting that future
rate cuts may not be needed.
    "The market is still acting as though they are behind the
curve," said Lou Brien, a market strategist at DRW Trading in
Chicago.
    Interest rate futures traders are pricing in a 100%
probability of a rate cut at the Fed's September meeting, a 75%
chance of an additional cut in October, and a 48% likelihood of
another cut in December, according to the CME Group's FedWatch
tool.
    
      August 21 Wednesday 4:07 PM New York / 2007 GMT
                                                      
                                                      
                                                      
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             1.935        1.9769    0.026
 Six-month bills               1.85         1.8986    0.011
 Two-year note                 100-86/256   1.5733    0.059
 Three-year note               100          1.5       0.051
 Five-year note                101-80/256   1.4735    0.043
 Seven-year note               102-58/256   1.5355    0.034
 10-year note                  100-88/256   1.5876    0.029
 30-year bond                  103-236/256  2.0737    0.031
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        -1.00        -1.50    
 spread                                               
 U.S. 3-year dollar swap        -3.25        -1.00    
 spread                                               
 U.S. 5-year dollar swap        -5.75        -0.50    
 spread                                               
 U.S. 10-year dollar swap      -10.00         0.25    
 spread                                               
 U.S. 30-year dollar swap      -40.25         0.75    
 spread                                               
 
 (Reporting by Karen Brettell; Additional reporting by Gertrude
Chavez-Dreyfuss; Editing by Steve Orlofsky and Rosalba O'Brien)
  
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