US Treasuries gain as investors wary ahead of Fed policy decision

The US Treasuries strengthened as investors remained cautious ahead of Federal Reserve monetary policy meeting, which is scheduled to take place on Wednesday at 18:00 GMT. The yield on the benchmark 10-year Treasury note fell 2 basis points to 1.551 percent and the yield on short-term 2-year note also dipped 1 basis point to 0.754 percent by 12:00 GMT.

The Federal Open Market Committee (FOMC), at its upcoming meeting is expected to keep the federal funds rate on hold at 0.25 percent – 0.5 percent. Investors will remain keen to focus on the comments made by the Fed Chair Janet Yellen for any signals about future policy.

It is worth remembering that in the last FOMC meeting minutes, most of the discussion was about the growth and development in the labour market because of subdued employment reports in April and May. Therefore, the central bank is likely to welcome the recovery seen in employment in June and the upheaval signifies that risk is skewed towards a more hawkish Fed despite Brexit.

On Monday, the 26 billion dollar 2-year note auction came at 0.760 percent (57.37 percent award at high) with a bid-to-cover ratio of 2.52, non-comps of 172.9 million dollar, an indirect bid of 29.9 percent and a direct bid of 10.3 percent. In context, the bid-to-cover averaged 3.01 over the past twelve auctions, indirect of 48.2 percent and directs of 16.2 percent.

Markets now look ahead to a handful of releases, highlighted by S&P/Case-Shiller home prices, Markit US services PMI, Conference Board consumer confidence and new home sales, followed by a 5-year note auction later in the session.

Meanwhile, the S&P 500 Futures trading flat at 2,162.25 by 12:40 GMT.