Treasury yields fall ahead of Fed meeting

Treasury yields fell on Tuesday morning, despite anticipation of what the Federal Reserve will say at its two-day policy meeting, which will begin later today.

The benchmark 10-year Treasury bill yield fell less than a basis point to 1.484% at 4 a.m. ET. The yield on 30-year Treasury bills fell to 2.176%. Yields move in the opposite direction to prices.

The Federal Open Market Committee’s two-day political meeting ends Wednesday afternoon, followed by a press conference with Fed Chairman Jerome Powell.

The Fed is not expected to take any action at its meeting, although investors will listen carefully to Powell’s comments for any signal of a possible plan to curtail central bank asset purchases.

Tiffany Wilding, US economist at PIMCO, said on Monday that the investment management firm expected the Fed to raise its growth outlook and “to revise inflation forecasts significantly” at its meeting.

“Due to the better growth outlook, and despite the transitory nature of the spike in inflation, we believe the majority of Fed officials will also advance their projections for the first rate hike through 2023,” Wilding said, compared to an expected rate. hiked in March 2024.

Wilding added that PIMCO’s baseline scenario remained that the Fed would announce a decrease in bond purchases at its December meeting. However, she said Powell might suggest that the Fed might consider the possibility of a cut in September, if “inflation is more persistent than expected.”

In terms of data expected on Tuesday, the May Producer Price Index is expected to be released at 8:30 a.m. ET. The PPI is another indicator of inflation, measuring the prices paid to producers rather than at the level of consumers.

The overall index is expected to rise 0.5% in May, according to Dow Jones estimates. Core PPI – which excludes volatile items like food, energy and commercial services – is also expected to rise 0.5%.

Retail sales data for May is also expected to be released at 8:30 a.m. ET, along with the NY Empire State Manufacturing Index for June. Industrial production data for May is then expected to be released at 9:15 a.m.ET.

The National Association of Home Builders’ housing market index for June is due at 10 a.m. ET.

Auctions are due on Tuesday for $ 34 billion in 52-week bills, $ 40 billion in 42-week bills and $ 24 billion in 20-year bonds.

CNBC’s Maggie Fitzgerald contributed to this report.

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