Minutes from last month’s Federal Reserve meeting on tap By Deborah Levine, MarketWatch NEW YORK (MarketWatch) — Treasury prices rose Tuesday, pushing 10-year yields toward the lowest levels this year, before the government’s auction of 3-year notes, expected to sell at a record low yield, and minutes from the Federal Reserve’s meeting last month. Treasurys gained some support overnight as stocks weakened after reports said Chinese authorities raised reserve requirements on some banks. Yields on 10-year notes (UST10Y 2.37, -0.02, -0.88%) , which move inversely to prices, fell 2 basis points to 2.37%. A basis point is 0.01%. Earlier, the benchmark’s yield touched 2.34%, the lowest since January 2009. The lowest level on record is 2.04%, reached in December 2008 during the depths of the credit crisis. Yields on 2-year notes (UST2YR 0.36, +0.01, +2.31%) were little changed at 0.35%, still near an all-time low. Bond markets were closed on Monday for Columbus Day. Also boosting the appeal of U.S. bonds are more complications surrounding Ireland and Greece, said Andrew Brenner, head of emerging markets at Guggenheim Securities. “Market sentiment is decisively negative today,” he said. The Treasury Department will accept bids on $32 billion in 3-year notes until 1 p.m. Eastern time. The amount is the smallest since February 2009. Yields on the current securities (UST3YR 0.53, +0.01, +1.54%) , sold last month, were little changed at 0.53%. “Treasury auctions have generally gone well in recent months as they offer retail investors a chance at taking down large blocks of securities without a huge price concession,” said strategists at RBS Securities. “I expect that this week’s auctions will go well, as they always do these days.” At the past four sales of 3-year notes, bidders offered to buy an average of 3.24 times the amount of debt sold, according to CRT Capital Group. Indirect bidders, a group which includes foreign central banks, bought 42.6% of the sales, on average. Direct bidders, which includes domestic money managers, purchased another 14.5% on average. The government will sell 10-year notes on Wednesday and 30-year bonds (UST30Y 3.74, -0.01, -0.24%) on Thursday. Fed minutes Investors will parse the Fed meeting minutes, due at 2 p.m. Eastern, for any hints about individual officials’ willingness to restart a bond-purchase program and what that program may look like. A central bank buying its own country’s bonds from the market is often called quantitative easing, a strategy designed to fend off deflation. Central banks effectively create new money via reserves that are used to purchase assets such as government bonds. Economists don’t tend to approve of quantitative easing, because it raises the risk of inflation in the future from the excess reserves put into the financial system. Indeed, bond investors are becoming more worried about inflation. Read about inflation, TIPS. “We will be looking for any sign of dissension — but given recent Fed speak we expect to see little of it,” said bond strategists at Nomura Securities. “It will also be critical to parse out any concern over only using U.S. Treasurys in an ongoing QE campaign and if so, what other asset classes the Fed would use.” Besides U.S. bonds, mortgage-backed securities are the other most likely asset class to be bought. The Fed did most of its massive program last year in the mortgage sector, which is closely connected to mortgage rates.

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