* Fed sees inflation risks with Trump's fiscal stimulus
* Fed minutes less hawkish than analysts expected
(Recasts lead with decline in yields; adds details on 30-year
bond yields; updates prices )
By Gertrude Chavez-Dreyfuss
NEW YORK, Jan 4 U.S. Treasury debt yields slid
in choppy trading on Wednesday after minutes of the last Federal
Reserve meeting struck a more uncertain tone than the market
expected, especially with respect to the new administration's
Yields on U.S. 10-year notes and 30-year bonds hit session
lows following the release of the Fed minutes on monetary
policy. The 30-year yields hit a four-week trough. Many
investors were expecting a more hawkish stance after the Fed in
December raised interest rates for the first time in a year.
"The broad anticipation was for hawkish thinking in
particular with regard to inflation risk," said Jim Vogel,
interest rate strategist at FTN Financial in Memphis.
"But instead it turned out that the meeting talked a great
deal about how to anticipate and plan for potential fiscal
stimulus. That was something that Yellen appeared to downplay in
the December press conference," he said, referring to Fed Chair
The minutes of the Dec. 13-14 meeting showed many
policymakers were considering faster interest rate increases as
the economy could grow at a quicker pace because of fiscal
stimulus under President-elect Donald Trump's administration.
The minutes also spelled out the downside risks that could
limit economic growth, such as trade barriers, the dollar's
appreciation and uncertainty on fiscal measures.
"We get the sense that the Fed may be content remaining on
the sidelines until there is more clarity on the economic impact
from the incoming administration's policies, which based on its
opaque approach to announcing priorities will take some time to
tease out," said Marvin Loh, global market strategist at BNY
Mellon in Boston.
In late trading, the U.S. 10-year note was up
4/32 in price to yield 2.437 percent, compared with 2.454
percent late on Tuesday.
U.S. 30-year bond prices were up 9/32, yielding 3.035
percent, down from Tuesday's 3.05 percent. Yields
hit their lowest level since Dec. 8, at 3.028 percent.
U.S. two-year note yields were at 1.218 percent,
compared with 1.226 percent on Tuesday. The yield was at 1.234
percent before the Fed minutes.
Analysts said the overall bias of the market was for higher
Treasury yields amid what is known as "rate-lock selling" during
an expected heavy corporate issuance calendar this month.
Wall Street dealers typically lock in borrowing costs for
corporate bonds they are underwriting by selling Treasuries as a
hedge before the deal is completed. Once the bond is sold, the
dealer buys back Treasuries to exit the rate-lock.
(Reporting by Gertrude Chavez-Dreyfuss; Editing by Andrew Hay
and Leslie Adler)