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BOND REPORT: Treasury Yields Edge Lower Ahead Of Fed Minutes1-3-18 7:57 AM EST

By Mark DeCambre, MarketWatch

Treasury prices ticked up, pushing yields slightly lower, on Wednesday as Wall Street awaited minutes from the Federal Reserve policy-setting gathering last month and as investors assessed Middle East unrest.

What are Treasurys doing?

The 10-year Treasury yield was at 2.451% from 2.461% late Tuesday in New York. The yield is hovering at the same level it was a year ago.

The 30-year bond yield slipped to 2.797%, compared with 2.809% in the prior session.

The 2-year note yield was little changed at 1.915%.

Bond prices move inversely to yields.

What's driving the market?

An account of the Federal Open Market Committee's Dec. 12-13 meeting will be released at 2 p.m. Eastern and likely will be pored over for further clues about the pace of the Federal Reserve interest-rate increases, against the backdrop of inflation hovering below the policy makers's 2% annual target and recent tax cuts that are expected to drive the economy higher.

According to CME Group data, market participants are expecting the next rate increase, after the Fed's recent quarter-percentage point increase to a range between 1.25% and 1.5%, to occur in March.

What has been viewed as muted moves in Treasury yields come as the dollar, as gauged by the ICE U.S. Dollar Index , has been near its lows for September at 92.07, despite tax-cut legislation and other fiscal stimulus measures which were expected to boost the buck.

Traders also focused on geopolitics, as thousands of people took to the streets of Iran on Wednesday, voicing support for Supreme Leader Ayatollah Ali Khamenei, following what has been the largest wave of antigovernment unrest in almost a decade (https://www.wsj.com/articles/economics-dissatisfaction-with-current-regime-fuel-iran-protests-1514679332).

Meanwhile, North Korea reopened communications with its neighbor the South, highlighting signs of relaxed tensions on the Korean Peninsula (https://www.wsj.com/articles/north-korea-revives-hotline-for-talks-with-south-1514957698).

What other data are ahead?

ISM manufacturing data for December and construction spending for November are slated for release at 10 a.m. Eastern. Also, monthly car sales data are expected throughout the session.

What are strategists saying?

"Today's FOMC minutes will provide some assessment on the U.S. inflation outlook. If the central bank reveals concerns over upside inflation expectations due to fiscal policies and an improved labor market, investors are likely to cover some of the dollars short positions. This should be reflected in interest rate expectations for March which currently indicate a probability of 56.3% rate hike in March," said Hussein Sayed, chief market strategist at FXTM.

What other assets are in focus?

The German 10-year bond yield, known as the bund , and serving as a proxy for the health of the eurozone economy was at 0.428%, versus 0.433% on Tuesday.

 

(END) Dow Jones Newswires

January 03, 2018 07:57 ET (12:57 GMT)

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