August 22, 2019 / 6:42 PM / 4 months ago

TREASURIES-Yields rise as Fed officials talk down further rate cuts

 (Rewrites throughout, adds quote, updates prices)
    * Fed's Harker, George don't see need to cut rates
    * Fed's Powell to speak on Friday
    * US manufacturing contracts for first time since 2009

    By Karen Brettell
    NEW YORK, Aug 22 (Reuters) - Treasury yields rose on
Thursday after two Federal Reserve officials said they saw no
reason to cut interest rates without new economic deterioration,
a day after Fed meeting minutes showed policymakers disagreed on
the U.S. central bank's rate cut last month.
    Philadelphia Federal Reserve Bank President Patrick Harker
said that he does not see the case for additional stimulus.
    Kansas City Federal Reserve Bank President Esther George
also said that she would be happy to leave interest rates at
current levels unless there are further signs the U.S. economy
is changing direction.             
    The Fed cut rates by 25 basis points at the close of its
July 30-31 meeting, with minutes for the meeting published on
Wednesday showing broad concern among policymakers over a global
economic slowdown, trade tensions and sluggish inflation.
    Policymakers were divided on cutting rates, however, despite
being united in wanting to avoid the appearance of being on the
path to further rate cuts.             
    “The thing that was really clear was the fractured lack of
on consensus among the policymakers,” said Tom Simons, a money
market economist at Jefferies in New York.
    The bond market has priced in a far more bearish picture on
the economy since the Fed meeting.
    The 2-year, 10-year yield curve inverted last week for the
first time since 2007, a signal that a recession is likely in
one to two years. The curve moved in and out of inversion on
Wednesday and Thursday.
    A speech by Federal Reserve Chairman Jerome Powell on Friday
is the next major focus for clues on future Fed policy.
    Interest rate futures traders are pricing in a 91%
probability of a rate cut at the Fed's September meeting,
according to the CME Group's FedWatch tool.
    Better-than-expected manufacturing data in Europe boosted
risk sentiment earlier on Thursday, reducing demand for
    U.S. data was mixed, with manufacturing data contracting for
the first time since September 2009, while the number of
Americans filing applications for unemployment benefits fell
sharply last week.             
    Benchmark 10-year notes            fell 6/32 in price to
yield 1.598%, up from 1.577% late on Wednesday.
    The 2-year, 10-year curve                was last inverted
by 0.50 of a basis point.

 (Editing by Lisa Shumaker)
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