Treasurys Mainly Unchanged, Awaiting Fed

NEW YORK - U.S. government bonds remained huddled in a narrow trading range Tuesday, with investors reluctant to add to their positions ahead of the Federal Reserve's monetary policy statement on Wednesday.

At 5 p.m. EDT, the 10-year Treasury note was down 63 cents per $1,000 in face value, or 2/32 point, from its level at 5 p.m. Monday. Its yield, which moves in the opposite direction, rose to 4.64 percent from 4.63 percent.

The 30-year bond fell 9/32 point, as traders reported selling ahead of Thursday's $5 billion auction. Its yield rose to 4.81 percent from 4.79 percent.

The 2-year note was unchanged, with its yield holding at 4.68 percent.

Yields on 3-month Treasury bills were 4.90 percent as the discount rate rose 0.02 percentage point to 4.76 percent.

The Federal Open Market Committee is universally expected to hold its target rate at 5.25 percent Wednesday for the seventh meeting in a row, and few anticipate any substantive change in the wording of its policy statement.

In its last policy statement, released March 21, the bank noted the ongoing "adjustment in the housing sector," but saw the economy continuing to expand "at a moderate pace." In the next breath, policy makers noted the "somewhat elevated" readings on core inflation.

In the weeks since, growth data have pointed to a considerable slowdown in the first quarter, but little clear moderation in the inflation rate. George Goncalves, rates strategist at Morgan Stanley, sees nothing to justify a change in heart for the Federal Reserve.

"The Fed is in no hurry to move rates up or down," he noted.

Treasurys prices rose briefly in the early afternoon on a well-received auction of $13 billion in new 10-year notes. The sale drew bids 2.3 times the amount on offer, 44.3 percent of which were from larger institutions such as central banks. This is the highest proportion of so-called indirect bids since November 2005. The success of the auction contrasted with a tepid sale of 3-year notes the previous session, and should bode well for the $5 billion offer of 30-year Treasurys on Thursday.