Treasury yields rise slightly ahead of Fed policy verdict

  • The Fed is set to wrap up its two-day December policy meeting on Wednesday afternoon.
  • Chairman Jerome Powell is due to hold a press conference afterwards at 2:30 a.m. ET.

U.S. Treasury yields rose slightly on Wednesday morning, as investors waited to hear the outcome of the Federal Reserve's latest policy meeting.

The yield on the benchmark 10-year Treasury note climbed less than a basis point to 1.4445% at 4 a.m. ET. The yield on the 30-year Treasury bond moved 1 basis point higher to 1.8301%. Yields move inversely to prices and 1 basis point is equal to 0.01%.

Treasurys

The Fed is set to wrap up its two-day December policy meeting on Wednesday afternoon, with Chairman Jerome Powell due to hold a press conference afterwards at 2:30 a.m. ET.

The U.S. central bank is expected to announce that it will speed up the tapering of its bond-buying program, as inflation continues to rise.

The producer price index, which is one measure of inflation, saw a hotter-than-expected November reading on Tuesday. The PPI showed a year-on-year increase of 9.6%, which was the fastest pace on record and higher than the 9.2% increase forecast by economists.

A CNBC Fed Survey predicts the Fed will double the pace of the taper to $30 billion at its December meeting, which would roughly end the $120 billion in monthly asset purchases by March. The central bank will then hike rates three times in each of the next two years, starting in June 2022, the survey respondents predict.

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Greg Williamson, head of strategy at Pluribus Labs, told CNBC's "Squawk Box Europe" on Wednesday that the Fed had a "very tight line to walk" with what it said after the meeting.

"It needs to convince the markets that it's earnest in fighting inflation but it can't confuse or disrupt the markets so much with inflation concerns that it leads the economy or the markets down," he explained.

Williamson also believed the Fed would increase its tapering of asset purchases by a further $15 billion, taking the monthly total to $30 billion. He expected the Fed could, therefore, finish its tapering process by June next year, which is when the central bank officials' "dot plots" indicate that it could be time to start raising interest rates.

Meanwhile, November's retail sales data is due out at 8:30 a.m. ET on Wednesday. The National Association of Home Builders December housing market index is then set to be released at 10 a.m. ET.

An auction is scheduled to be held on Wednesday for $35 billion of 119-day bills.

CNBC's Maggie Fitzgerald contributed to this marker report.

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