* Oil prices recover, drive investor interest in stocks
* Treasury to sell $26 billion of 2-year notes
* Investors focus on FOMC meeting and statement
By Tariro Mzezewa
NEW YORK, Jan 26 (Reuters) - U.S. Treasuries prices were steady during volatile trading on Tuesday as oil prices slightly recovered and ahead of the start of the Federal Reserve’s two-day policy meeting.
Treasuries rallied overnight after Chinese stocks fell sharply, dragging European stocks down and increasing appetite for U.S. government debt. The gains pared in morning trading as recovering oil prices came into focus for traders.
The see-saw trading action has been frequent since the start of 2016 as jittery investors pile into U.S. government debt whenever stock and oil prices fall.
“Overall Treasuries have been tracking oil and equities, so for each tick and gyration in oil and equities there’s a reaction in Treasuries,” said Justin Lederer, Treasury strategist at Cantor Fitzgerald in New York.
Oil prices were lifted by hopes that OPEC and non-OPEC producers may be edging closer to a deal to tackle one of the biggest supply gluts in decades..
With little U.S. domestic data due this week, investors are focusing on the Federal Reserve’s two-day policy meeting which begins later in the day.
Though the U.S. central bank is not expected to raise interest rates this week, investors will parse the statement from the meeting for details on the impact of the turmoil seen in markets this year.
“We want to see how the statement is worded and if there’s any dialect reflecting what’s been going in the world and comments on inflation,” said Lederer.
The Treasury Department will sell $26 billion of 2-year notes to what traders expect to be decent demand.
The benchmark 10-year note was last up 1/32 in price to yield 2.025 percent, down from 2.022 percent late Monday.
The 30-year bond was last flat at 2.801 percent, little changed from 2.802 percent late on Monday.
On Wall Street, major stock indexes were positive, with the benchmark S&P 500 stock index was last up 1.06 percent, led by recovering oil prices and strong earnings reports.