October 11, 2017 / 6:47 PM / a year ago

TREASURIES-Bonds steady after Fed minutes fail to surprise

 (Recasts with Fed minutes, adds auction results, updates
    * Fed minutes maintain expectations for Dec rate hike
    * Solid demand for three-year, 10-year supply

    By Karen Brettell
    NEW YORK, Oct 11 (Reuters) - U.S. Treasury prices were
little changed on Wednesday after minutes from the Federal
Reserve’s September meeting were in line with expectations and
after the Treasury Department saw solid demand for three-year
and 10-year note supply.
    Fed policymakers had a prolonged debate about the prospects
of a pickup in inflation and the path of future interest rate
rises if it did not.             
    "There’s really nothing that stood out. The market reaction
has been relatively muted," said Subadra Rajappa, head of U.S.
rates strategy at Societe Generale in New York.
    "We go back to focusing on inflation, that’s really where we
need more clarity to get a sense of where things are headed for
the rest of the year," Rajappa said.
    Benchmark 10-year notes             were last up 2/32 in
price to yield 2.339 percent, down from 2.345 percent on
    The 10-year yields jumped to 2.402 percent on Friday, the
highest level since May 11, after the government’s employment
report for September showed a rise in wages that boosted
expectations inflation is increasing.
    Consumer price data on Friday will be scrutinized for
confirmation of higher prices, though many analysts have said
that data is muddied by recent hurricanes.
    Adverse weather is seen as having impeded lower-income
workers from getting to work more than it did higher-income
    The Fed minutes maintained expectations that the U.S.
central bank is likely to raise rates again at its December
    Its policy statement last month was seen as hawkish, and
that view gained further credence in the wake of strong U.S.
economic data and Fed officials' comments.
    "Speakers have been out in force recently, and I think
they've been pretty clear that a December rate hike is certainly
on the table," said Thomas Simons, a money market economist at
Jefferies in New York.
    The Treasury saw solid demand for $24 billion in three-year
notes and $20 billion in 10-year notes on Wednesday, part of $56
billion in new coupon-bearing supply this week.             
    The government will also sell $12 billion in 30-year bonds
on Thursday.

 (Reporting by Karen Brettell; Editing by Paul Simao and
Jonathan Oatis)
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