September 20, 2017 / 1:26 PM / in a year

TREASURIES-Prices gain before Fed statement

    * Fed meeting in focus for rate path clues
    * Solid German debt auction boosts Treasury prices

    By Karen Brettell
    NEW YORK, Sept 20 (Reuters) - U.S. Treasuries prices gained
slightly on Wednesday as investors awaited the conclusion of the
Federal Reserve’s two-day meeting for new indications on whether
the U.S. central bank is likely to raise interest rates against
this year.
    The U.S. central bank is widely expected to announce that it
will begin paring its bond holdings, and many analysts and
investors expect the reductions may begin in October.
    The Fed will also update its economic projections, known as
its “dot plot,” which will be used to evaluate whether an
interest rate increase in December is likely.
    “Everyone will be watching the dot plot,” said Ian Lyngen,
head of U.S. rates strategy at BMO Capital Markets in New York.
    “Even if they don’t decrease the dots for 2018 and 2019, any
backup in yields will ultimately prove to be a buying
opportunity because there is still a great deal of economic
uncertainty at this point, and there’s a lot of data between now
and the December meeting,” Lyngen said.
    Benchmark 10-year notes             were last up in 3/32
price to yield 2.232 percent, from 2.243 percent on Tuesday.
    Traders will also be closely watching any comments the Fed
makes on inflation, which has remained below the Fed’s 2-percent
target. Expectations of a December rate hike increased after
data last Thursday showed that U.S. consumer prices accelerated
in August.             
    Futures interest rate traders are now pricing in a
62-percent chance of a December rate increase, according to the
CME Group’s FedWatch Tool.
    Traders are also looking for any clarity on personnel
changes as the end of Fed Chair Janet Yellen’s term approaches
and after the resignation of Vice Chair Stanley Fischer earlier
this month.
    A solid auction of German 30-year government debt helped
boost Treasury prices earlier on Wednesday.             

 (Editing by Nick Zieminski)
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