September 18, 2017 / 1:38 PM / a year ago

TREASURIES-Yields rise as investors focus on Fed meeting this week

    * Fed meeting in focus for rate hike signals
    * Fed seen likely to announce balance sheet reductions

    By Karen Brettell
    NEW YORK, Sept 18 (Reuters) - U.S. Treasury prices fell on
Monday as investors focused on the Federal Reserve's two-day
policy meeting this week for signals on whether an additional
interest rate hike is likely this year.
    The U.S. central bank is widely expected to announce at the
conclusion of its meeting on Wednesday that it will begin paring
its massive portfolio of Treasuries and mortgage-backed
securities, with the reductions likely to start this year.
    Less certain is whether the policy-setting Federal Open
Market Committee will raise rates again by the end of the year.
Interest rate futures traders are pricing in a 57 percent chance
of a hike at the December meeting, according to CME Group’s
FedWatch Tool.
    "The key market moving event for this week is the FOMC,"
said Subadra Rajappa, head of U.S. rates strategy at Societe
Generale in New York. "The debate in the market is whether the
Fed will be able to raise rates at the December meeting, given
the trajectory of inflation."
    Treasury yields have jumped since data on Thursday showed
that U.S. consumer prices accelerated in August, easing concerns
that inflation would disappoint with another weak print.
    The Consumer Price Index (CPI) rose 0.4 percent last month,
the largest rise in seven months.             
    "Last week's CPI number was a step in the right direction.
If we maintain this trajectory during the second half of the
year, then I think they will be well on their way to hiking in
December," Rajappa said.
    Concerns about North Korean missile tests have also eased,
helping yields rise from nine-month lows a little more than a
week ago.
    Benchmark 10-year notes             were last down 6/32 in
price to yield 2.222 percent. The yield fell to 2.016 percent on
Sept. 8, the lowest level since Nov. 10.

 (Editing by Paul Simao)
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