U.S. Government bonds rise ahead of FOMC decision, 25bps rate hike remains already factored in

The U.S. Treasuries were pushed higher Wednesday ahead of the Federal Reserve’s last monetary policy decision for 2016, which is scheduled to be released today by 19:00 GMT. Also, investors sought refuge in safe-haven assets amid losses in riskier assets including equities and crude oil.

The yield on the benchmark 10-year Treasury note fell nearly 4 basis points to 2.44 percent, the yield on long-term 30-year Treasury also dipped 4-1/2 basis points to 3.10 percent and the yield on short-term 3-year note slid 1 basis point to 1.45 percent by 12:00 GMT.

The Federal Reserve is expected to increase the target range of the key interest rate by 25 basis points to 0.50-0.75 percent, with a unanimous decision. Little change to the statement, though the Committee is likely to acknowledge that market-based measures of inflation compensation have risen further.

With the economy seemingly close to ‘full employment’ there is a now a case for more hawkish guidance. The sell-off in US Treasuries reflects concerns looser fiscal policy may cause the Fed to move more aggressively. For now, the Fed will probably not change its rhetoric, while it waits to see what fiscal policy measures are enacted, said Lloyds Bank in its research note.

Moreover, crude oil prices declined as investors cashed in profits after U.S. inventories rose by 4.68 million barrels last week; the industry-funded American Petroleum Institute was said to report. The International benchmark Brent futures fell 1 percent to $55.19 and West Texas Intermediate (WTI) dipped 1.11 percent to $52.39.

Lastly, ahead of today’s FOMC statement, markets receive retail sales, industrial production/capacity utilisation and business inventories releases earlier in the session.

Meanwhile, the S&P 500 Futures traded flat at 2,267 by 12:30 GMT. While at 12:00 GMT, the FxWirePro's Hourly Dollar Strength Index remained highly bearish at -134.71 (lower than -75 represents bearish trend).