US Treasuries advance on Fed outlook

The US Treasuries saw further gains across the curve during a relatively quiet session on Friday that saw little data of great significance. Meanwhile, the yield on the benchmark 10-year Treasury note fell 2 basis points to 1.661 percent mark and the yield on short-term 2-year Treasury note dipped 1/2 basis point to 0.763 percent by 11:20 GMT.

In the global debt market, the UK gilts continue to hover at record low Friday, after testing its all-time low of 1.23 percent from February on Thursday and it is likely to come down to 1.20 percent in light of looming Brexit risk. The German 10-year bund yields fell to a new record low of 0.034 percent, after testing its 2015 low of 0.05 percent and it likely to test zero next week.

Moreover, JGBs hit a fresh all-time low of minus 0.14 percent on Friday, following global debt prices as investors wary ahead of potentially seismic events this month including Britain’s referendum on European Union membership, Bank of Japan and the Federal Reserve meeting.

The US bonds have been closely following developments in oil markets because of their impact on inflation expectations, which are well below the Federal Reserve's target. Today, crude oil prices fell on a stronger dollar, after jumping beyond $51 mark on Thursday. The International benchmark Brent futures fell 1.31 percent to $51.28 and West Texas Intermediate (WTI) dipped 1.23 percent to $49.94 by 11:50 GMT.

Markets now look ahead to preliminary Michigan consumer sentiment and Treasury budget statement data to finish off the week on Friday. However, focus has already clearly shifted to the FOMC statement next week, accompanied by updated economic projections and followed by Fed Chair Yellen’s press conference. Although price action remains doubtful, more hawkish tones from across the FOMC spectrum have definitely highlighted an increased desire to resume policy normalization.

Meanwhile, S&P 500 Futures fell 13.25 points to 2,101 by 12:25 GMT