By Cynthia Lin
U.S. Treasury prices teetered around the flatline Wednesday as
investors await color on Federal Reserve policy to get a better
sense of when the central bank might raise rates.
In early New York trading, benchmark 10-year notes were flat,
yielding 2.407%, according to Tradeweb. The 30-year bond gained
1/32 to yield 3.218%, while two-year notes edged down 1/32 to yield
0.443%. Bond yields move inversely to their prices.
Market participants said trading activity overnight was a bit
below the market's recent average, with investors shifting to the
sidelines ahead of some Fed policy-related events.
The central bank releases minutes Wednesday afternoon from its
July policy meeting. Investors are focused on the simmering debate
over when best to increase the policy rate.
"The Fed minutes will help provide clarity as to the committee's
temperament as it relates to a sooner than later rate hike," said
Adrian Miller, director of fixed-income strategy at GMP
Securities.
While so-called dovish members of the board likely argued that
inflation is tame and slack remains in the labor market, there is a
sense that more officials are gaining confidence in the economic
recovery.
Eric Green, head of U.S. Research at TD Securities, said the
minutes pose a slight risk to shorter-dated Treasurys, which have
rallied sharply this month. The two-year Treasury yield tumbled as
low as 0.39% last week from 0.53% at the start of the month.
For now, most bond investors expect the first rate increase to
happen in the middle of 2015.
Central bankers are also gathering in Jackson Hole, Wyo.,
starting Thursday for a conference hosted by the Kansas City
regional Fed bank. The focus this year is on "re-evaluating labor
market dynamics," central to today's debate over how much progress
in the jobs market is enough for the Fed to tighten policy. Fed
Chairwoman Janet Yellen is slated to speak Friday at the
symposium.
While that event is likely to hold off bold bets in the
Treasurys market in the coming days, bond traders are anticipating
a pickup in volatility as the year winds down. With many analysts
maintaining forecasts for the 10-year yield to rise to 3% by
year-end, the market could be in store for plenty of selling this
autumn if economic data come in strong and put impending rate
increases squarely in focus.
Write to Cynthia Lin at cynthia.lin@wsj.com