The US Treasuries were little changed on Wednesday as markets look ahead to the July FOMC statement and Fed Chair Janet Yellen’s post-statement press conference, in an attempt to estimate the Fed's most likely step.
The yield on the benchmark 10-year Treasury note hovered around 1.55 percent mark and the yield on short-term 2-year note remained steady at 0.752 percent by 13:00 GMT.
The Federal Open Market Committee (FOMC), at its upcoming meeting is expected to keep the federal funds rate on hold at 0.25 percent – 0.5 percent. Investors will remain keen to focus on the comments made by the Fed Chair Janet Yellen for any signals about future policy.
Moreover, it is worth remembering that in the last FOMC meeting minutes, most of the discussion was about the growth and development in the labour market because of subdued employment reports in April and May. Therefore, the central bank is likely to welcome the recovery seen in employment in June and the upheaval signifies that risk is skewed towards a more hawkish Fed despite Brexit.
According to St George Economics morning report, the US curve flattened further overnight, with the 2-year government bond yield rising, while the 10-year bond yield ranged sideways. The two-year treasury yield rose 2 basis points to 0.75 percent, while the 10-year bond yield slipped 1 basis point to 1.56 percent
“The Fed is expected to leave official interest rates unchanged. Financial markets will be closely watching the Fed’s statement for a clue on the likely timing of a rate hike. Market pricing of the Fed funds rate was little changed overnight, implying a 30 percent chance of a rate hike in September, a 60 percent chance by December, and 100 percent by September 2017, “reported St George Economics in its morning note.
In terms of economic data release, the June durable goods report revealed an overall -4.0 percent m/m reading, well below market expectations for a -1.1 percent m/m result, as compared to the revised -2.8 percent m/m reading that occurred in May (previous -2.3 percent m/m).
Meanwhile, the S&P 500 Futures trading up 5.50 points at 2,169 by 13:00 GMT.
