BOND REPORT: 2-year Treasury Yield Rises Ahead Of Key Fed Meeting

By Sunny OhFeaturesDow Jones Newswires

Fed officials meet Dec. 12-13 and are widely expected to raise rates

Short-dated yields rose on Monday ahead of a midweek Federal Reserve meeting that is likely to result in the central bank's third, and final, interest-rate increase of 2017, while Janet Yellen's last news conference as Fed chairwoman will deliver further insights about the central bank's outlook for the U.S. economy.

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What are Treasurys doing?

The 2-year note yieldthe maturity most sensitive to expectations for Fed policy, rose 2.5 basis points to 1.823%. The benchmark 10-year Treasury note yield was mostly flat at 2.387%, while the yield for the 30-year bond was little changed at 2.772%.

Bond prices move in the opposite direction of yields.

What's driving markets?

Investors are mostly looking ahead to a week with first-tier economic data and a Federal Reserve meeting Dec. 12-13, at which the central bank is expected to raise rates. Consumer-price index data, retail sales and industrial-production numbers are set to arrive in the next few days.

The meeting's news conference helmed by Fed Chairwoman Janet Yellen could serve as her swan song before she retires in February. Investors said potential tax cuts could influence the central bank's growth outlook. Still, there was unlikely to be many changes to future rate projections and economic forecasts.

See: Here's why the Fed will hike interest rates (http://www.marketwatch.com/story/heres-why-the-fed-will-hike-interest-rates-2017-12-11)

Market participants reduced risk earlier in the day, supporting a rise in haven bond prices, after a report of a terrorism attack in New York, where a suspect was arrested after detonating a homemade bomb (http://www.marketwatch.com/story/possible-explosion-at-new-york-citys-port-authority-bus-terminal-2017-12-11).

What did market participants say?

"The Fed is going to deliver another quarter-point of tightening on Wednesday and while that aspect of the FOMC meeting is a foregone conclusion, the open question remains how will the committee characterize the broader economic and inflation outlook," wrote Ian Lyngen and Aaron Kohli, fixed-income strategists at BMO Capital Markets.

What else is on investors' radar?

The European Central Bank will announce its rate decision and economic forecasts on Thursday. The ECB has committed to extending its bond-buying until Sep. 2018, and said it would only raise interest rates once it tapered its asset purchases.

The Treasury Department unloaded $20 billion of 10-year notes to tepid demand. Analysts said yields for long-dated maturities trading at depressed levels, and therefore lofty prices, has tempered bidder enthusiasm. Trading in outstanding government paper can be influenced by new issuance.

On the data front, the Job Openings and Labor Turnover Survey showed job vacancies in October fell to 5.99 million from 6.18 million.

How are other assets doing?

The German 10-year government bond yield fell 1.4 basis point to 0.293% after European stock indexes were in negative territory. On Monday, Germany's DAX 30 index(DAX) closed down 0.2% at 13,123.06, and France's CAC 40 finished down 0.2% to 5,386.83, while Spain's IBEX 35 fell 0.1% to close at 10,306.90.

(END) Dow Jones Newswires

December 11, 2017 17:26 ET (22:26 GMT)