Treasury yields fell Tuesday as the Federal Reserve‘s two-day meeting gets underway, with investors hoping to glean fresh insights on the central bank’s policy plans.
The 10-year Treasury note yield TMUBMUSD10Y, -1.12% was down 0.9 basis point to 2.735%. The 2-year note yield TMUBMUSD02Y, -0.86% fell 0.8 basis point to 2.583%, while the 30-year note yield TMUBMUSD30Y, -0.35% was virtually unchanged at 3.058%. Bond prices move in the opposite direction of yields.
The Federal Open Market Committee is gathering for its first meeting of 2019, which will conclude with Fed Chairman Jerome Powell’s news conference on Wednesday at 2:30 p.m. Eastern time. Market participants are looking for indication that the central bank will pause its rate-increase cycle amid fears the economy’s momentum could stall further if the Fed carries out another dose of monetary tightening. Still, market expectations, reflected in a plot of the policy maker’s projections for interest rates, known as the dot plot, are for two more rate increases in 2019.
“So much of the volatility we have seen in the past few months have come from comments from Chairman Powell. We don’t think the Fed is done hiking rates, so you might still see a little tone of that coming into the press conference tomorrow,” said Victoria Fernandez, chief markets strategist at Crossmark Global Investments.
See: Fed to stress patience and that means no interest-rate move until at least June
Fresh details on policy maker’s plans for its balance-sheet reduction will also draw scrutiny after minutes from the December meeting showed it was open to dialing back the rate at which Treasurys and government-sponsored mortgage bonds rolled off its more than $4 trillion asset portfolio.
Investors saw some data in the morning, but advanced trade in goods has been delayed due to the lingering effects of the government shutdown. The Conference Board’s consumer confidence index fell 6.4 points to 120.2 in January, after a steep 9.8 point drop the previous month. Economists surveyed by MarketWatch had expected the measure of consumer optimism to fall to 124.0 from 128.1 in December.
“Some of that is going to be temporary. We just had a government shutdown and a lot of market turmoil. I think we are slowing, but I’m not sure that huge drop we saw in [consumer confidence] is going to be sustainable going forward,” said Fernandez.
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