By Mark DeCambre, MarketWatch

Treasury yields inched lower to kick off trading on Monday, in an important week that includes the Federal Reserve decision on Wednesday--one that could influence trading in government bonds that have thus far been colored by signs of weakening global economy.

The 10-year Treasury note yield edged off 1.1 basis points to 2.880%, after marking its largest yield gain since Nov. 2, according to Dow Jones Market Data. The 2-year note yield fell 1.2 basis points to 2.721%, while the 30-year bond declined 0.6 basis point to 3.138%.

Bond prices move in the opposite direction of yields.

Read:The big question this week: Is the Fed about to completely break this market? (http://www.marketwatch.com/story/the-big-question-this-week-is-the-fed-about-to-completely-break-this-market-2018-12-17)

Concerns about the health of the stock market, with the Dow Jones Industrial Average closing in correction territory on Friday, and lackluster inflation have highlighted investors uncertainty about the rate-hike path for the U.S. in 2019, even as a fourth rate increase remains expected at the conclusion of the Fed's two-day policy.

A recent round of remarks from members of the Federal Open Market Committee have led some investors to look for the central bank to pause its rate-hike cycle after delivering its increase on Wednesday.

Wall Street will watch to see if Fed boss Jerome Powell signals a more hesitant course of monetary-policy normalization, in light of a shaky market and growing signs of waning economic expansion.

On Friday, growth in China's industrial output and retail sales came in weaker than expected, stoking fears that pockets of weakness were cropping up in the world's second-largest economy.

"Looking into 2019, the markets are understandably nervous that the Fed will leave real rates too high," wrote Sean Darby, chief global equity strategist at Jefferies, in a Monday note.

Still, U.S.'s economic growth has remained sufficiently strong to lead some economists to predict (http://www.marketwatch.com/story/heres-why-the-fed-wont-save-the-stock-market-despite-its-worst-december-start-since-1980-2018-12-15)that Fed may be reluctant to dial back its pace of tightening, even if the Dow, S&P 500 and the Nasdaq Composite indexes are in correction, widely defined as a 10% drop from a recent peak.

Looking ahead, fixed-income investors will watch a reading of regional industrial production, the Empire State index for December, which is slated to be released at 8:30 a.m. Eastern Time, while the home builders index for the same month is scheduled for 10 a.m.

Beyond the Fed, market participants will watch for the final reading of gross domestic product on Friday, as well as developments that threaten to partially shut down the U.S. government, as well as policy updates from the Bank of Japan and the Bank of England, amid that country's messy process of exiting from the European Union.

 

(END) Dow Jones Newswires

December 17, 2018 08:12 ET (13:12 GMT)

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