By Sunny Oh

Chicago Fed president expects 'one to two' hikes this year

Treasury yields fell Wednesday as traders snapping up U.S. government bonds were encouraged by Fed Vice Chairman Stanley Fischer's dovish comments on Tuesday, when he reiterated his commitment to two more rate hikes this year, in contrast to more hawkish remarks made by other Fed presidents on Wednesday.

The yield on the 10-year Treasury note slipped 4.1 basis points to 2.379%, the largest one-day decline in two weeks. The yield on the 30-year Treasury bond fell 3.8 basis points to 2.987%. The yield on the two-year Treasury note fell 3.2 basis points to 1.274%.

Bond prices move inversely with yields, and one basis point is equal to a hundredth of a percentage point.

"The bigger theme was that in the last couple of days, some Fed presidents gently talked down the probability of further rate hikes, especially with Fischer's comments," said Guy Lebas, Janney's chief fixed-income strategist.

See:Brexit: Here's what happens now that the U.K. has triggered Article 50 (http://www.marketwatch.com/story/brexit-heres-what-happens-now-that-the-uk-has-triggered-article-50-2017-03-29)

On Tuesday, positive economic data took yields up as better-than-expected readings from the consumer-confidence index heightened demand for risky assets and sapped demand for safe government paper. British Prime Minister Theresa May also formally signaled the beginning of Brexit negotiations by invoking Article 50 of the Lisbon Treaty, a decision that was widely anticipated and had little influence on the Treasury market.

"The Brexit declaration was many months in coming, so it's not much of a surprise," LeBas said.

Opinion:Three ways today's triggering of Brexit will change Britain and Europe (http://www.marketwatch.com/story/three-ways-article-50-will-change-britain-and-europe-2017-03-29)

Chicago Federal Reserve President Charles Evans, who is a voting member of the central bank's interest-rate-setting committee, said he expects "one or two" more interest-rate increases this year. Evans added an inflation rate of 2.5% "for a time" would not be out of keeping with the Fed's plans.

Remarks from Boston Fed President Eric Rosengren and San Francisco Fed President John Williams forecasting three to four more rate hikes this year appeared to do little to arrest the decline of Treasury yields on Wednesday.

Auctions for $28 billion worth of seven-year notes sold well, with the ratio of bids awarded to bids received peaking above two, a level of activity largely considered by traders as healthy.

 

(END) Dow Jones Newswires

March 29, 2017 17:40 ET (21:40 GMT)

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