U.S. Treasurys prices edged higher on Tuesday as traders positioned for the release of second-quarter U.S. economic growth data, a Federal Reserve policy statement and the Treasury’s next refunding announcement, all due on Wednesday.
Trading so far this week has occurred in a tight range.
“We are definitely in a wait-and-see mode this week,” said Wilmer Stith, co-manager of the Wilmington Broad Market Bond Fund in Baltimore. “We get the statement from the FOMC tomorrow and that will lay out – for at least 48 hours until we get the employment data on Friday – what the committee’s ideas are with regard to tapering the Fed bond purchases.”
Since the timing, pace, and actuality of any reductions in bond purchases depends on what data reveal about U.S. economic growth and unemployment, the market is focused on data releases like the second-quarter gross domestic product report due at 8:30 a.m. on Wednesday and the July U.S. employment data due at the same time on Friday.
(Read more: Wall Street pros: Fall taper priced in…sort of)
The Treasury’s quarterly refunding announcement on Wednesday has also attracted unusually intense interest.
Some analysts expect the Treasury to cut coupon-bearing debt sales for the first time since September 2010 as a shrinking federal budget deficit reduces funding needs.
Traders expect the first cuts in issuance to be in the shortest maturities. Less short-term debt should support prices and keep borrowing costs down for the federal government whose deficit, while on track to shrink this year, remains elevated from its level before the 2007-2009 recession, analysts said.