Yields lower with FOMC, U.S.-China trade talks in view
(Recasts, updates yields, adds Fed news)
By Kate Duguid
NEW YORK, Feb 19 (Reuters) - Treasury yields were lower in
Tuesday afternoon trade ahead of the release on Wednesday of
minutes from the Federal Reserve's January policy-setting
meeting and as trade talks between the United States and China
neared their March 1 deadline.
Yields fell across the board, with maturities in the middle
of the yield curve making the biggest moves. The three-year
yield was last down 2.2 basis points and the
five-year yield was last down 2 basis points.
Investors will scrutinize the minutes from the Federal Open
Market Committee (FOMC) after a dovish statement in January. Fed
Chair Jerome Powell had said U.S. central bank policy makers
would be "patient" after signs of an economic slowdown roiled
financial markets in December.
Two-year yields, a proxy for market expectations
for rate hikes, were 1.8 basis points lower, at 2.502 percent,
suggesting investors expect the minutes to reaffirm a slower
pace of rate hikes.
"The FOMC minutes in particular for U.S. rates will be worth
watching. We're looking for more details on balance sheet
discussions - not only the timing of when runoff will end, but
potential discussions around what the reinvestment policy will
look like, what the composition of the portfolio will look
like," said Jonathan Cohn, interest rate strategist at Credit
New York Fed President John Williams on Tuesday said he was
comfortable with the level U.S. interest rates are at now, and
sees no need to raise them again unless growth or inflation
shift to an unexpectedly higher gear.
In an interview with Reuters, Williams said he felt rates
had reached his current view of a lower "neutral" level, with
growth and unemployment leveling off and inflation, if anything,
a bit weaker than hoped for.
U.S. President Donald Trump said that the latest round of
trade negotiations which began Tuesday with China were going
well and suggested he was open to pushing off the March 1
deadline to complete negotiations.
Tariffs on $200 billion worth of Chinese imports are
scheduled to rise to 25 percent from 10 percent by March 1 if
the world's two largest economies do not settle their trade
Treasuries are a safe-haven investment that draw investors
in times of global tumult. Tuesday's rise in Treasury prices,
and fall in yields, suggested a decreased appetite for risk.
The benchmark 10-year government yield was last
down 1.4 basis points at 2.652 percent.
(Reporting by Kate Duguid in New York; Editing by David
Gregorio and James Dalgleish)
First Published: 2019-02-19 17:47:12
Updated 2019-02-19 22:37:23
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