By Deborah Levine, MarketWatch
NEW YORK (MarketWatch) -- Treasury prices were under pressure on Tuesday, pushing long-term yields up towards their highest level in at least three weeks, before the Federal Reserve ends its policy meeting.
Yields on 10-year notes (UST10Y 3.69, 0.00, -0.05%) rose 1 basis point to 3.70%. Bond yields move inversely to prices and a basis point is 0.01%.
Last week, yields reached 3.72%, the highest since Feb. 22.
Yields on 2-year notes (UST2YR 0.94, +0.01, +1.40%) , more sensitive to changes in monetary-policy expectations, were little changed at 0.95%. On Friday, the securities closed at 0.96%, the highest level since Jan. 7.
U.S. debt remained under pressure after a report showed housing starts fell 5.9% to a 575,000 pace last month. See story on housing starts.
Analysts and investors are sure the Fed will repeat its pledge that interest rates will remain at historic lows "for an extended period." The only uncertainties revolve around what the central bank says about its other policy measures and its assessment of the economy's growth and strength. Read more about the Fed.
"The Fed will acknowledge the benign inflation," said John Spinello, Treasury strategist at Jefferies & Co., one of the 18 primary government security dealers that trade with the Fed.
"The Fed will not alter rates until the fourth quarter at the earliest, or perhaps the first quarter of 2011," he said.
Traders in fed funds futures are pricing in a 66% chance that the Fed will raise rates to 0.50% by December, from a current range of zero to 0.25%. Read more about fed funds futures.
Also, after the Fed's last meeting in January, one policy maker dissented from the decision.
This meeting may produce more dissenters, analysts said.
