July 23, 2019 / 1:47 PM / 3 months ago

TREASURIES-Yields rise as investors wait on ECB, Fed meetings

    * Central bank policy in focus
    * IMF cuts global growth outlook
    * Treasury to sell $40 bln two-year notes

    By Karen Brettell
    NEW YORK, July 23 (Reuters) - U.S. Treasuries yields edged
higher on Tuesday as investors waited on central bank meetings
for new signals about how many interest rate cuts are likely in
Europe and the United States.
    The European Central Bank (ECB) is expected to signal easier
monetary policy when it meets on Thursday.             
    The Federal Reserve is also seen as certain to cut its
benchmark rate at its July 30-31 meeting.
    Though a 25-basis-point cut by the Fed is viewed as more
likely than a deeper one, some analysts have argued that a 50-
basis-point decrease would be more effective at stimulating the
economy and offsetting concerns about slowing global growth.
    “I think if they do 25 basis points, both the bond market
and the stock market will sell off, because I think the market
will be disappointed they didn’t do 50 basis points,” said Tom
di Galoma, a managing director at Seaport Global Holdings.
    Interest rate futures traders are pricing in a 79% chance of
a 25-basis-point cut and a 21% chance of a 50-basis-point one,
according to the CME Group’s FedWatch tool.
    Benchmark 10-year notes             fell 5/32 in price to
yield 2.060%, up from 2.043% on Monday. The yields have held
between 2.023% and 2.078% for four consecutive trading sessions.
    Expectations that the U.S. central bank could make a 50-
basis-point cut rose last week after New York Fed President John
Williams argued for fast action to stave off economic weakness,
but receded after the New York Fed said the comments were not
about upcoming policy action.                          
    The International Monetary Fund on Tuesday lowered its
forecast for global growth this year and next, warning that more
U.S.-China tariffs, auto tariffs or a disorderly Brexit could
further slow growth, weaken investment and disrupt supply
chains.             
    Yields on short-term Treasury bills increased after
President Donald Trump and U.S. congressional leaders reached a
deal on a two-year extension of the debt limit and federal
spending caps that would avert a feared government default later
this year but add to rising budget deficits.             
    Issuance of short-term government debt is likely to increase
to fund the rising deficit. Yields on three-month bills
           increased to 2.093%, from 2.082% on Monday.
    The Treasury Department will sell $40 billion in two-year
notes on Tuesday, the first sale of $113 billion in short and
intermediate-dated notes this week. It will also sell $41
billion in five-year notes on Wednesday and $32 billion in
seven-year notes on Thursday. 

 (Editing by Bernadette Baum)
 
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