By Deborah Levine and Sue Chang, MarketWatch
SAN FRANCISCO (MarketWatch) — Treasury prices rose on Wednesday, pushing yields down, with the Federal Reserve expected to announce a new large-scale bond-buying plan in the hopes that lower borrowing costs will rejuvenate the economy.
Bond traders saw little to react to in the results from Congressional elections, which came in largely as expected, leaving 10-year yields in the middle of a range set in the last few weeks.
Investors also shrugged off a slew of economic data that pointed to a steady, albeit, a slow economic recovery.
Yields on 10-year notes (UST10Y 2.55, -0.05, -1.81%) , which move inversely to prices, fell 5 basis points to 2.54%. A basis point is 0.01%.
Two-year yields (UST2YR 0.35, -.00, -1.14%) were little changed at 0.35%, just above an all-time low of 0.33%.
At 2:15 p.m. Eastern time, the Federal Open Market Committee will end its two-day policy meeting, releasing a statement that is expected to include details of a new quantitative-easing purchase program.
“I only hope that the bond market’s gridlock comes to an end today even as gridlock now laps at the shores of Congress,” said Bill O’Donnell, head of Treasury strategy at RBS Securities. “Treasurys have been in a range for a while and today’s FOMC statement gives us guidance as to whether we’re going to remain in the range, or re-trend.”
That range in benchmark 10-year yields is between 2.38% and 2.85%, he said. “The market has plenty of ‘capacity’ to move in whatever direction that investors deem appropriate after seeing the FOMC statement,” O’Donnell said.
Estimates for how much in Treasury bonds the central bank will buy have ranged as high as $2 trillion.
Many analysts now expect the Fed to announce something more along the lines of $100 billion a month for the next several months, saying they will re-assess the need for purchases as the economic data evolve.
“We expect the re-establishment of a massive [quantitative easing] program in the face of a weak jobs picture and a very soft economy,” said Tom di Galoma, head of U.S. rates trading at Guggenheim Partners.
ADP said private U.S. employers added 43,000 jobs in October. The data comes two days before the government’s broader, more closely followed nonfarm payrolls report. Read details on ADP’s October data.
The Commerce Department also said factory orders rose a seasonally adjusted 2.1% in September, outpacing economists’ forecast of 1.6% in a MarketWatch survey. Read details on September factory orders.
The service sector also showed signs of sustained growth, with the ISM non-manufacturing index rising to 54.3% from 53.2% in September which also exceeded economists’ expectations. Read details on ISM non-manufacturing index.
Still the economic reports did not inspire much activity in the market with investors’ attention focused on the FOMC meeting this afternoon. As strategists at CRT Capital Group noted, the data are “a sideshow to the big show.”
