By Deborah Levine, MarketWatch
NEW YORK (MarketWatch) — Treasury prices declined Wednesday, pushing long-term yields up from their lowest levels in almost a month, as markets reversed some of the prior day’s big moves ahead of the end of the Federal Reserve’s policy meeting and a news conference from Fed Chairman Ben Bernanke.
Yields on 10-year notes 10_YEAR +2.66% , which move inversely to prices, rose 6 basis points to 2.06%. A basis point is 1/100 percentage point.
Yields on 30-year bonds 30_YEAR +2.53% increased 9 basis points to 3.10%.
Two-year-note yields 2_YEAR -3.25% , which tend to be most sensitive to monetary-policy expectations, were little changed at 0.24%.
The Federal Open Market Committee will release a policy statement at 12:30 p.m. Eastern time. Its updated economic forecast will come out at 2 p.m. and Bernanke’s news conference will begin at 2:15 p.m. Read story on Bernanke’s press conference.
Analysts don’t expect any major policy announcement from the Fed, in light of the U.S. central bank having kicked off a program in September to extend the maturity of its bond portfolio by buying longer-dated securities and selling shorter-term notes.
“We do not expect major changes in Fed policy, as the incoming data since the last meeting does not point to a recessionary trend,” said Nomura Securities strategists George Goncalves and Ankit Sahni.
Tension from the euro zone
However, tension from the euro zone may lead the Fed to consider lowering the cost of borrowing through its currency-swap lines, which wouldn’t have a significant economic impact, they wrote in a note.
Treasurys slipped more after ADP’s report showed private employers added 110,000 jobs in October, more than economists expected. The report comes two days before the Labor Department’s more closely followed monthly nonfarm-payrolls report. See story on ADP.
Th ADP data could signal that Friday’s report will be a little better than forecast, but expectations are for a modest level of hiring.
“Job growth of 105,000 or 125,000 is functionally identical, but it would provide further evidence that labor conditions have improved off the summer lows,” said Eric Green, chief market economist at TD Securities. “It confirms a slow-growth environment persists for now, a triumph over recession fears, but slow growth nonetheless.”
Illiquidity, not hope
On Tuesday, Treasurys jumped after the Greek prime minister said he’d hold a public referendum on the country’s bailout package, which stirred new fears that the country could default. Read more on Treasury rally.
Markets seemed more sanguine by Wednesday, though yields on 10-year Italian IT:10YR_ITA -0.12% and Spanish debt ES:10YR_ESP -0.36% kept rising, indicating continued worries about the outlook for those larger countries.
“We don’t interpret the rather sharp overnight weakness in Treasurys as reflecting new-found confidence in Europe, but rather a set of illiquid flows amidst vague price discovery,” said David Ader, head of government-bond strategy at CRT Capital Group.
Also, the Treasury Department said that next week it will auction $32 billion in 3-year notes, $24 billion in 10-year notes and $16 billion in 30-year bonds. These are all unchanged from the refunding package in August, and in line with analysts’ projections.
A Treasury official said it planned to hold offering sizes for notes and bonds stable over the near term despite previous statements that it expected to modestly decrease offering amounts in coming months. Read more on Treasury refunding.
