US Treasury prices fell on Friday as traders booked profits in advance of government debt auctions next week and a marquee annual meeting of global central bankers at which Federal Reserve Chair Janet Yellen is scheduled to speak. Analysts expect Yellen to stick to an easy monetary policy stance in her speech as domestic inflation remains below the Fed's 2 percent target and uncertainty persists about the global risks to US economic growth.
Several top policy-makers suggested this week the Fed is prepared to raise rates if the economy improves further. "There's a lot of confusion out there. Investors are waiting for Yellen to hear what she has to say," said Larry Milstein, head of government and agency trading at R.W. Pressprich & Co in New York. Before Yellen's speech, set for August 26 at the Jackson Hole, Wyoming event, the US Treasury Department will sell a combined $88 billion in two-year, five-year and seven-year notes.
On Friday, weaker sovereign bond prices in Europe also exerted downward pressure on their US counterparts on light volume and in the absence of US economic data, analysts said. The yield on German 10-year Bunds was up 2 basis points at -0.057 percent, while the yield on 10-year British gilts rose 4 basis points to 0.595 percent. Benchmark 10-year Treasury notes were down 13/32 in price for a yield of 1.582 percent, up 5 basis points from late on Thursday, while the 30-year bond was 19/32 lower to yield 2.288 percent, up 3 basis points.
The yield on two-year Treasury notes, which are sensitive to traders' views on Fed policy, rose 4.5 basis points to 0.750 percent. The central bank's minutes from its July 26-27 policy meeting, released on Wednesday, showed policymakers wanted to leave their policy options open on raising rates. San Francisco Fed President John Williams said late on Thursday that he was in no hurry to raise rates, while cautioning that the economy could overheat if rates are kept low for too long. Interest rate futures implied traders see a 53 percent chance the Fed will raise rates at its December 13-14 policy meeting, up from 47 percent at Thursday's close, according to CME Group's FedWatch tool.
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