U.S. Treasury yields slump on hopes of 25bp Fed rate cut; Chair Powell’s post-conference speech eyed

The U.S. Treasury yields during Wednesday’s afternoon session ahead of the Federal Reserve’s monetary policy meeting, scheduled to be held today by 18:00GMT, where it is widely expected to cut interest rates by 25bp, although prospects for more easing further out are less clear.

The meeting will be followed by the central bank’s policy statement, updated economic forecasts and dot-plot charts, as well as Chair Jerome Powell’s post-meeting press conference, which will be closely watched for insight into the near-term policy path.

The yield on the benchmark 10-year Treasury yield plummeted over 4 basis points to 1.772 percent, the super-long 30-year bond yield also plunged 4 basis points to 2.241 percent and the yield on the short-term 2-year suffered 2-1/2 basis points to 1.713 percent by 12:15GMT.

The dot-plot is bound to shift lower this year and next, probably to suggest an additional cut this year, and perhaps also with a tighter distribution than back in July. To maintain a supportive tone, Powell is likely also to repeat the FOMC’s determination to take action to sustain the expansion against the backdrop of heightened external risks to the outlook, Daiwa Capital Markets reported.

But also expect Powell to be challenged in the press conference on this week’s extreme pressure in the repo market.  Data-wise, finally, August housing start and building permits data are due, the report added.

Meanwhile, the S&P 500 Futures remained tad down at 3,002.88 by 12:20GMT.