NEW YORK: A disappointing report on durable goods orders in June lifted US Treasury prices on Wednesday as investors awaited possible clues on an interest rate increase from the Federal Reserve at the conclusion of its two-day meeting.
A steeper-than-forecast 4 percent drop in demand for airplanes and other big-ticket items revived worries about the domestic manufacturing sector and reinforced the notion the Federal Open Market Committee, the US central bank's policy-setting group, would leave its target range on interest rates at 0.25 percent to 0.75 percent.
"The best thing for the Fed is essentially take a pass," said Aaron Kohli, interest rate strategist at BMO Capital Markets in New York.
Interest rates futures implied traders saw about a 48 percent chance the FOMC would raise rates at its December meeting, compared with 52 percent on Tuesday, CME Group's FedWatch program showed.
The FOMC is scheduled to release its policy statement at 2 p.m. (1800 GMT).
Another factor underpinning the fall in US yields was expectations of more stimulus from the Bank of Japan following Japanese Prime Minister Shinzo Abe's plan for a surprisingly large $265 billion stimulus package in an effort to boost his country's sluggish economy.
The two-year Treasury yield, which is sensitive to traders' views on Fed policy, slipped nearly 1 basis point to 0.754 percent. It reached 0.778 percent on Tuesday, its highest since Britain's vote to leave the European Union on June 23.
Benchmark 10-year Treasury notes were up 4/32 in price for a yield of 1.547 percent, down 1 basis point from late on Tuesday, while the 30-year bond was up 14/32 in price to yield 2.260 percent, down 2 basis points.
On the supply front, the US Treasury Department will sell $15 billion of two-year floating-rate notes at 11:30 a.m. (1530 GMT), following poor sales of two-year and five-year fixed-rate debt on Monday and Tuesday.
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