Treasury yields rose Wednesday as investors look ahead to the end of the Federal Reserve’s meeting, which could deliver a fresh impetus for fixed-income traders.
The 10-year Treasury note yield TMUBMUSD10Y, +0.72% rose 1.7 basis points to 2.729%. The 2-year note yield TMUBMUSD02Y, +0.47% was up 1.4 basis points to 2.583%, while the 30-year note yield TMUBMUSD30Y, +0.40% added 0.9 basis point to 3.051%. Yields rise as bond prices fall.
The Fed will conclude its first policy gathering of 2019 with an updated statement at 2 p.m. Eastern time, followed by a news conference to be helmed by Chairman Jerome Powell at 2:30 p.m. Analysts are hoping for details on central bankers’ recent declarations of patience in its strategy of normalizing monetary policy from crisis-era levels—moves that have created turbulence in the broader market in recent months.
Investors will also watch for whether policy makers will tinker with unwinding a $4 trillion asset portfolio. Despite lingering questions over the economy’s strength, the Fed still expects two rate increases in 2019 based on its dot plot, which shows senior Fed officials’ forecasts for interest rates over the next few years.
“Investors will watch for how the Fed will qualify the pause. Is it basically for six months or is it only until the March meeting? But market participants are focused more on what are the implications for quantitative tightening, even if it’s too early to include in the statement,” said Thanos Bardas, head of global rates at Neuberger Berman.
The Fed’s reaction to a record 35-day partial government shutdown and a protracted tariff battle between China and the U.S. are likely to be points of discussion during Powell’s Q&A.
See: Fed to stress patience and that means no interest-rate move until at least June
The U.S. and China will continue trade talks on Wednesday with pressure on both sides to cut a deal before a March 2 deadline, when tariffs on $200 billion of Chinese goods will be raised to 25% from 10%. But the Justice Department unveiling of indictments against Huawei Technologies Monday, for bypassing sanctions on Iran and stealing trade secrets, appeared to throw a wrench into those negotiations.
Read: Trump faces pressure to make deal as China trade talks resume
Also check out: Here’s how hard China’s slowdown could hit global economic growth
As for data, the ADP private payrolls numbers for January hit 213,000, well above expectations for an increase of 174,000. This will serve as a prelude to the more widely-watched official jobs report on Friday. Meanwhile, pending home sales for December fell 2.2% to a reading of 99, its lowest since April 2014.
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