TREASURIES-U.S. yields seen in tight range ahead of next week's Fed meeting

BY Reuters | ECONOMIC | 09/15/21 12:03 PM EDT

NEW YORK, Sept 15 (Reuters) - U.S. government bond yields ticked higher on Wednesday, in a bounce back as the 10-year yield touched a fresh three-week low following economic data that showed U.S. import prices fell for the first time in 10 months in August, further evidence that inflation had probably peaked.

With no top tier economic data coming in the rest of the week, traders are looking forward to next week's Federal Reserve meeting as it prepares to reduce its trove of bond holdings.

Economic data is starting to underpin the idea that high inflation is transitory according to Jason Pride, chief investment officer for private wealth at Glenmede.

"It seems like the market storyline is coming around to the Fed's storyline, which I believe is stabilizing the range of where interest rates are priced," Pride said.

The yield on 10-year Treasury notes was up 3.5 basis points to 1.314% after earlier touching a three-week low of 1.26%.

The yield on the 30-year Treasury bond was up 2.6 basis points to 1.878%.

A closely watched part of the U.S. Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes, seen as an indicator of economic expectations, was at 109.9 basis points.

The two-year U.S. Treasury yield, which typically moves in step with interest rate expectations, was up 0.4 basis points at 0.213%. (Reporting by Rodrigo Campos)

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

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