Treasury Prices Fall Heading Into the Fed Meeting

“NEW YORK (MarketWatch) — Treasurys fell on Wednesday, pushing yields higher for the first trading session since the controversial deposit levy was announced as part of Cyprus’s bailout package, as the market looked ahead to the conclusion of the Federal Open Market Committee meeting.

Federal Reserve Chairman Ben Bernanke is scheduled to speak in a press conference at 2:30 p.m. Eastern.

Yields on the benchmark 10-year U.S. Treasury note 10_YEAR +2.21%  rose 4 basis points to 1.95%. Yields move inversely to prices and one basis point is one one-hundredth of a percentage point.

Yields on the 30-year bond30_YEAR +1.31%  rose 3 basis points to 3.16% and yields on the five-year note5_YEAR +2.68%  rose 2 basis points to 0.802%.

Uncertainty in Cyprus increased the safe-haven bid for Treasurys as the Cypriot parliament rejected the deposit tax on Tuesday, a requirement for the 10 billion euro bailout. While the rejection of the bailout could lead to a collapse of the Cypriot banking sector and an exit from the euro zone, the European Central Bank said Tuesday it would provide liquidity.

Investors will closely watch the FOMC statement and Bernanke’s address for any discussion about the risks associated with quantitative easing. The Fed purchases $85 billion in Treasury and mortgage debt each month and has linked the length of its bond-buying program to a substantial improvement in the labor market. Recent economic data, including the latest jobs report, suggest the U.S. economy is improving and continued progress could lead to an earlier-than-expected slowing of asset purchases….”

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