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U.S. Treasuries suffer in silent trading day ahead of 2-year auction, FOMC policy meeting

The U.S. Treasuries suffered Monday ahead of this week’s two-day FOMC meeting that concludes on Wednesday. With a further 25 bps hike in the FFR range (to 2.00-2.25 percent) seemingly a done deal, the main focus for investors will be on the Fed’s updated forecasts, and associated commentary, and what this implies for the likelihood of further policy action at future meetings.

The yield on the benchmark 10-year Treasuries jumped nearly 2 basis points to 3.085 percent, the super-long 30-year bond yields also climbed nearly 2 basis points to 3.222 percent and the yield on the short-term 2-year traded close to 1-1/2 basis points higher at 2.817 percent by 11:20GMT.

On the US data front, there are more regional manufacturing surveys (from the Chicago and Dallas Feds) today, while the Conference Board’s latest consumer survey and house price data will be of some interest tomorrow. August new home sales are released on Wednesday ahead of the Fed announcement, Daiwa Capital Markets reported today.

On Thursday, we will receive a final reading on Q2 GDP – likely to leave the growth rate little changed from the current estimate of 4.2 percent – while advance trade, durable goods orders and inventory reports for August also due that day will cast some light on how GDP growth is shaping up in Q3. The durable goods orders report will also be of interest to see whether it verifies anecdotal stories – such as those in the Fed’s Beige Book – which have pointed to some firms delaying investment decisions due to uncertainties about the global trading environment.

On Friday, further light on Q3 GDP growth will be cast by the personal spending and income report for August, while the latest development in the core PCE deflator will be analysed closely. The Chicago PMI and final University of Michigan consumer survey results for September complete a busy diary. In the bond market the US Treasury will auction 2-year notes today, 5-year notes tomorrow and 7-year notes on Thursday, the report added.

Meanwhile, the S&P 500 Futures traded 0.17 percent lower at 2,928.75 by 10:15GMT, while at 10:00GMT, the FxWirePro's Hourly Dollar Strength Index remained neutral at -22.05 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex

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