Treasury yields tick lower ahead of Fed policy update

U.S. Treasury yields slipped for a third day early Wednesday ahead of the Federal Reserve’s policy update that is likely to underline the central bank’s commitment to keeping monetary policy easy.

What are Treasurys doing?

The 10-year Treasury note yield

fell 3.5 basis points to 1.329%, while the 2-year note rate

edged 1.1 basis points lower to 0.188%. The 30-year bond yield

slipped 3.5 basis points to 1.549%.

What’s driving Treasurys?

The Fed’s two-day meeting will conclude on Wednesday, with the central bank releasing its policy announcement at 2 p.m. ET, followed by a press conference by Fed Chairman Powell.

Investors say the Fed will repeat its willingness to keep policy accommodative as long as needed, indicating that it would keep interest rates low for an extended period. Some think the central bank may pave the way to capping bond yields for certain maturities, a policy of yield-curve control, later this year.

The Fed will also release its projections for interest rates and the economy, after the last update in December.

See: Fed will be encouraged by the May job-market surprise but unlikely to rip up its low-rates-for-longer script

In economic data, the U.S. May consumer price index is due for publication at 8:30 a.m. Eastern. MarketWatch-polled economists expect prices to be unchanged in May with consumer spending subdued by the coronavirus pandemic, after prices fell by 0.8% in April.

What did market participants’ say?

“Markets are rallying on the feeling that the Fed and the ECB and global central banks along with governmental authorities have literally opened up the check book,” said Tony Rodriguez, head of fixed income strategy at Nuveen, referring to how corporate credit and other asset prices have soared in recent weeks as bond yields fell.

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