US Treasury Yields Dip Ahead of Next Week’s FOMC Rate Decision

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U.S. Treasury yields traded steady most of the session on Friday before ticking lower into the close. The price action was driven primarily by profit-taking and position-squaring ahead of next week's two-day U.S. Federal Reserve Monetary Policy meeting. At the end of the meeting on Wednesday, the Fed will release its latest interest rate decision, monetary policy statement and future projections.

The 2-year U.S. Treasury note settled lower at 2.804 percent. The benchmark 10-year U.S. Treasury note finished lower at 3.066 percent and the 30-year U.S. Treasury bond dipped to 3.203 percent.

On September 26, the Fed is widely expected to raise the federal funds rate by a quarter-point. This will push the funds target to 2 percent to 2.25 percent, where it last was more than 10 years ago.

During the meeting, members of the Federal Open Market Committee (FOMC) are expected to discuss how much more monetary tightening is necessary to keep the economy (and inflation) healthy.

U.S. Economic Reports

It was a light day on Friday as far as U.S. economic data was concerned. Flash Manufacturing PMI came in better-than-expected at 55.6, versus a 55.1 estimate and last month's 54.7 reading. Flash Services PMI was 52.9, below the 54.9 estimate. The previous month's reading was revised lower to 54.8.

The flash reading of IHS Markit's U.S. Composite PMI Output Index for September was 53.4, down from 54.7 last month and the lowest it has been in 17 months. The index takes into account data from the manufacturing and service indexes.

"Output growth in the private sector fell in the latest month to its lowest in 17 months and future expectations hit the lowest point they have been at this year," IHS Markit said Friday.

IHS Markit said some of the slower growth in output could be attributed to Hurricane Florence, according to anecdotes. But new business growth rose and employment rose the most it has since May of 2015, the firm said.

IHS Markit also said that "average prices charged by private sector firms increased at the sharpest rate seen in the nine-year survey history." Manufacturers said metals prices also rose due to tariffs, the firm noted.

Chris Williamson, IHS Markit chief business economist, said in prepared remarks that the September results were "no surprise" given East Coast storms and said going into the fourth quarter, growth could accelerate.

"The escalation of trade wars, and the accompanying rise in prices, contributed to a darkening of the outlook, with business expectations for the year ahead dropping sharply during the month," he said.

This article was originally posted on FX Empire


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This article appears in: Investing , Bonds , US Markets
Referenced Symbols: SPX

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