SINGAPORE: US 10-year Treasuries inched higher in subdued trade on Tuesday as investors wait to see whether the Federal Reserve will announce another bond-buying programme after its policy meeting ends on Thursday.
Ten-year Treasuries rose 1/32 in price in Asia to yield roughly 1.651 percent, staying within the 1.542 percent to 1.740 percent range seen over the past week.
Market expectations for the Fed to announce a third round of bond purchases, known as QE3, at the conclusion of its Sept. 12-13 policy meeting have increased since data last Friday showed US jobs growth slowed sharply in August.
If the Fed were to announce QE3 this week, 10-year Treasury yields may eventually rise toward around 1.8 percent to 1.9 percent assuming that US economic conditions improve toward the year-end, said Tomoaki Shishido, rate analyst for Nomura Securities in Tokyo.
The more bond-friendly scenario would be for the US central bank to hold off on QE3, and to opt for just extending its conditional pledge to keep interest rates low through late 2014, Shishido said, adding that he thought that was also the more likely outcome from this week's Fed meeting.
"It would be harder for inflation expectations to rise," he said, adding that such an option was also unlikely to trigger a sharp rally in risky assets.
If the Fed extends the likely period of very low interest rates to the second half of 2015, 10-year yields may have scope to fall by around 10 basis points from where they are now, he added.
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