Treasurys rise ahead of this week's Fed rate meeting
NEW YORK—Treasury prices rose in quiet trading Monday as investors waited for the Federal Reserve's decision on interest rates later this week.
Most investors believe the Fed will reduce the key interest rate by a quarter percentage point after its two-day policy meeting concludes Wednesday. However, the central bank is also expected to indicate that the cut will be the last for a while, as policymakers monitor the risk of inflation.
The central bank has already lowered the target federal funds rate by 3 percentage points since last summer to 2.25 percent. The economy remains weak, but energy and food costs keep hitting record highs and the dollar continues to fall to all-time lows against the euro. With inflation appearing to be growing into a larger threat than the economic slowdown, investors do not believe the Fed is likely to lower rates much further.
Meanwhile, the tight credit markets have been improving -- giving investors an appetite for riskier assets again.
"There's somewhat of a sentiment change toward risk, at least for the time being," said John Spinello, bond strategist at Jefferies & Co.
But after a big sell-off in government securities last week, they gained back some ground on Monday.
"There's not a lot to trade on today, except to get positions in order" ahead of the Fed's meeting, Spinello said.
The benchmark 10-year Treasury note rose 10/32 to 97 10/32 and yielded 3.83 percent, down from 3.87 percent late Friday, according to BGCantor Market Data. Prices and yields move in opposite directions.
The 30-year long bond rose 18/32 to 97 and yielded 4.56 percent, down from 4.60 percent late Friday.
The 2-year note, which tends to react the most to interest rate changes because of its short duration, rose 4/32 to 99 18/32 and yielded 2.35, down from 2.42 percent.
In after-hours trading, the 30-year yield edged up to 4.57, while the 2-year and 10-year yields were unchanged.
The 3-month Treasury bill's yield was at 1.40 percent, up from 1.38 percent late Friday, while its discount rate was at 1.372 percent.
Last week, Treasury prices fell sharply as investors bet that the Fed was gearing up to end its rate-cutting streak, as investment banks pared back their borrowing from the central bank, and as economic and corporate earnings reports arrived that were not as dismal as expected.
