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

Fed announcement comes at 2 p.m. Eastern

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.

"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)