BOND REPORT: Treasury Yields Fall As Investors Await Fed Policy Statement

By Sunny Oh Features Dow Jones Newswires

Fed announcement comes at 2 p.m. Eastern

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Treasury yields slipped ahead of the conclusion of the Federal Reserve's policy meeting, with investors looking for a better sense of when the central bank would like to start unwinding its balance sheet.

The 10-year Treasury yield fell 2 basis points to 2.318%. The yield for the 2-year Treasury note slipped 2.4 basis points to 1.379%, while the 30-year bond yield edged lower 1.5 basis point to 2.905%. Bond prices move inversely to yields.

The Federal Open Market Committee, the central bank's interest-rate setting panel, will conclude their two-day meeting at 2 p.m. Eastern on Wednesday. Traders will parse updates to the policy statement to gauge when the central bank plans to start shrinking its $4.5 trillion portfolio of government bonds and mortgage-backed securities. But investors expect Fed Chairwoman Janet Yellen and fellow policy makers to make little change to the language for the July meeting.

See: Fed to stick to plans for rate hike, balance-sheet selloff this year (http://www.marketwatch.com/story/no-retreat-fed-to-stick-to-plans-for-rate-hike-balance-sheet-selloff-this-year-2017-07-24)

The Senate voted to begin debating a health care overhaul on Tuesday (http://www.marketwatch.com/story/senate-votes-to-open-debate-on-republican-health-bill-as-pence-breaks-tie-2017-07-25), but the first version of legislation that would repeal and replace Obamacare was rejected (http://www.marketwatch.com/story/one-version-of-gop-health-care-bills-fails-in-senate-vote-2017-07-25). Analysts say the struggle to overhaul Obamacare, or the Affordable Care Act, could be a harbinger for the viability of the White House's campaign to avert a debt-ceiling crisis in the fall. Money market investors are already showing signs of concern with (http://www.marketwatch.com/story/debt-ceiling-fears-bubble-up-in-treasury-bills-2017-07-25)the 3-month Treasury bill's yield rising (http://www.marketwatch.com/story/debt-ceiling-fears-bubble-up-in-treasury-bills-2017-07-25)above the 6-month bill's yield (http://www.marketwatch.com/story/debt-ceiling-fears-bubble-up-in-treasury-bills-2017-07-25) as analysts say the potential for the congressional logjam to affect the U.S. government's ability grows.

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"The saga currently playing out in the Senate retains its relevance because if (and it's still a big unknown) the GOP is able to cobble together a passable set of health-care reforms, that will clear the way for a more productive budget debate in the fall," wrote Ian Lyngen, head of U.S. rates strategy for BMO Capital Markets.

The Commerce Department will release the new-home sales numbers for June at 10 a.m. Eastern, which could set some near-term direction for the Treasurys market ahead of the policy meeting. Economists polled by MarketWatch forecast a 615,000 pace of new-home sales.

(END) Dow Jones Newswires

July 26, 2017 09:11 ET (13:11 GMT)