August 20, 2019 / 1:35 PM / a month ago

TREASURIES-Yields fall as Fed minutes, Powell speech in focus

    * Fed to release minutes from July meeting on Wednesday
    * Fed Chairman Jerome Powell to speak on Friday
    * Italy's government on brink of collapse

    By Karen Brettell
    NEW YORK, Aug 20 (Reuters) - U.S. Treasury yields fell on
Tuesday as the prospect of more central bank easing boosted
demand for government debt, while concerns about Italy’s
government and Britain’s tumultuous exit from the European Union
added safe haven buying.
    Investors are focused on meetings by the Federal Reserve and
the European Central bank next month, when the central banks are
expected to cut rates as both regions face slowing growth.
    The U.S. central bank will release minutes from its July
meeting on Wednesday, while Fed Chairman Jerome Powell is due to
speak on Friday, where he is expected to give guidance on
whether a rate cut is likely in September.
    “The major event is definitely Powell on Friday and we will
see how he talks about the markets and what the expectations are
for the September meeting,” said Justin Lederer, an interest
rate strategist at Cantor Fitzgerald in New York.
    The prospect of further U.S. rate cuts has increased since
the yield curve between two-year and 10-year notes
               inverted last Wednesday for the first time since
2007, signaling that a recession is likely in the next one to
two years.
    The Fed said in July that further rate decreases may not be
needed following its first cut in over a decade, but investors
will be looking to see if Powell gives a different view in light
of recent market activity.
    Interest rate futures traders are pricing in a 100 percent
chance of a September rate cut, according to the CME Group’s
FedWatch tool.
    Benchmark 10-year notes             were last up 16/32 in
price to yield 1.544%, down from 1.598% late on Monday.
    The two-year, 10-year yield curve flattened to 4 basis
points, from 6 basis points.
    Concerns about the collapse of Italy’s government and
Britain exiting the EU without an deal also created some
safe-haven demand on Tuesday.
    Luigi Di Maio, head of the ruling 5-Star Movement, signaled
the imminent demise of Italy's coalition government by thanking
Prime Minister Giuseppe Conte for his time in office.
            
    Prime Minister Boris Johnson's demand that the European
Union reopen the Brexit divorce deal was rebuffed by the bloc,
which said Britain had failed to propose any realistic
alternative to an agreed insurance policy for the Irish border.
            

 (Editing by Nick Zieminski
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