Treasuries Close Nearly Flat Ahead Of Fed's Policy Announcement

(RTTNews) - Treasuries saw considerable volatility over the course of the trading day on Tuesday before ending the day nearly flat.

Bond prices largely maintained a positive bias throughout the session but closed near the unchanged line. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by less than a basis point to 2.589 percent.

The lackluster close by treasuries came as traders looked ahead to the Federal Reserve's highly anticipated monetary policy announcement.

The Fed is scheduled to announce its latest policy decision at about 2 pm ET on Wednesday while also providing its revised economic projections.

The release of the policy statement will be followed by a press conference by Fed Chair Janet Yellen at about 2:30 pm ET.

While the Fed is widely expected to announce a further reduction in the pace of its asset purchases, traders are likely to pay closer attention to any changes to the language regarding the outlook for interest rates.

Recent upbeat economic data has led to some concerns that the Fed will no longer say that it will be appropriate to maintain the current target range for rates for a "considerable time" after the asset purchase program ends.

However, Peter Boockvar, managing director at the Lindsey Group, said it would be more relevant if the Fed alters its statement indicating that "there remains significant underutilization of labor resources."

"This line came out of nowhere in July because it all of a sudden appeared after we've seen a big improvement in the labor market," Boockvar said.

He added, "If 'significant underutilization' comes out it may say more about actual timing more so than the obsession of 'considerable time,' as it still could be."

On the economic front, the Labor Department released a report showing that U.S. producer prices were unchanged in the month of August.

The Labor Department said its producer price index was unchanged in August after inching up by 0.1 percent in July. The unchanged reading came in line with economist estimates.

Excluding decreases in food and energy prices, core producer prices ticked up by 0.1 percent in August after edging up by 0.2 percent in the previous month. The modest increase also matched estimates.

The report also showed that producer prices and core producer prices both increased by annual rates of 1.8 percent in August.

Paul Dales, Senior U.S. Economist at Capital Economics, said, "Based on past form, these data are consistent with consumer price inflation of just below the Fed's 2% target."

While the Fed is likely to be in the spotlight on Wednesday, reports on consumer price inflation and homebuilder confidence may attract some attention ahead of the announcement from the central bank.