Treasury bond prices lower at midmorning

Treasury bond prices lower at midmorning

	Published : Wed, 21 Mar 2007 16:39 By : Agencies Print this Story

NEW YORK (AP) - Treasury bond prices were somewhat lower midmorning Wednesday, as investors pared back bullish bets ahead of the afternoon's Federal Open Market Committee meeting.

At 11 a.m. EDT, the 10-year Treasury note was down $1.88 per $1,000 in face value, or 6/32 point, from its level at 5 p.m. Tuesday. Its yield, which moves in the opposite direction, rose to 4.58 percent from 4.55 percent.

The 30-year bond fell 15/32 point. Its yield rose to 4.74 percent from 4.71 percent.

The 2-year note was unchanged. Its yield rose to 4.62 percent from 4.61 percent.

Yields on 3-month Treasury bills were 5.06 percent as the discount rate rose 0.01 percentage point to 4.93 percent.

With Treasury prices still close to the upper end of the range they have traded in over the past couple of months, the market's assumption that the Federal Reserve will make no significant change in policy was persuading some investors to erase bets on further gains.

The Fed is due to announce its decision around 2:15 p.m., ending this week's two-day meeting. The bank is expected almost unanimously to keep its target funds rate at 5.25 percent and the vast majority of economists expect the statement to maintain the tightening bias, which warns that more rate hikes may yet be needed if inflation does not tame.

'A couple of weeks ago there was this idea that the Fed could drop the inflation risk bias. We have taken this out' in recent days and that has reduced hopes of a post-FOMC rally, said Carl Lantz, fixed-income strategist at Credit Suisse in New York.

'In general, we are very much in wait and see mode for the statement right now,' said Michael Cloherty, chief Treasurys trading strategist at Banc of America Securities in New York.

Cloherty said volumes had been pretty thin so far, as they were overnight with Japanese investors out for a public holiday. There was no major U.S. economic data reports Wednesday.

Investors are watching to see if Fed policy-makers change the January comment about 'somewhat firmer' recent growth and whether they specifically address worries about the U.S. subprime mortgage market and possible spillover effects on the broader housing market and growth.

Cloherty at Banc of America Securities said he believes that 'any explicit mention of subprime ... would trigger a rally but' he would be 'surprised' if that happens.