By Sunny Oh

Treasury yields were mostly unchanged on early Friday trading as traders looked ahead to next week's meeting by the Federal Reserve, where a rate increase is expected.

The 10-year Treasury note yield was flat at 3.080%, close to a seven-year high at 3.119%. The 2-year note yield was up 1.3 basis points to 2.821%, its highest since June 2008, while the 30-year bond yield was mostly unchanged at 3.212%, according to Tradeweb data. Bond prices move in the opposite direction of yields.

In a session with no first-tier economic data, investors will gear up for next week's Fed meeting in Sept. 25-26, where a rate increase is expected. More important, investors will hone in on Fed Chairman Jerome Powell's news conference where he may debate the risks to the economy, and the future rate increase trajectory. Based on prices for eurodollar futures, traders have already priced in two additional hikes this year, and two more next year.

See: Here's when traders began to fall in line with the Fed's projected hiking path (http://www.marketwatch.com/story/heres-when-traders-began-to-fall-in-line-with-the-feds-projected-hiking-path-2018-09-20)

Market participants will be on the lookout for remarks on whether the Fed will pause or shoot past the neutral rate, where monetary policy is neither restrictive or accommodative. Fed. Gov. Lael Brainard and other senior Fed officials have said the central bank could push interest rates above that threshold if the economy maintains its momentum. The fed-funds rate is currently at a range of 1.75% to 2.00%.

Read: Fed has to start considering the risk of a recession, former governor says (http://www.marketwatch.com/story/fed-has-to-start-considering-the-risk-of-a-recession-former-fed-gov-larry-meyer-says-2018-09-20)

"The Fed is widely expected to hike another 25 basis points to a range of 2.00-2.25% at the September confab. Powell's news conference will, as always, be closely watched but we expect his comments to reflect growing upside risks to the economic backdrop. He is likely to throw shade on the notion that tariffs are a significant downside risk. Expect him to be asked about the politicization of the Fed--but also expect that he'll craftily dodge this one," wrote Tom Porcelli, chief U.S. economist for RBC Capital Markets.

Japanese debt sold off after the Bank of Japan which held its regular policy-setting gathering on Tuesday, reduced its bond-buying to Yen50 billion to Yen60 billion yen, surprising markets. The central bank has the discretion to calibrate its bond purchases as part of its yield-curve control policy. BOJ Gov. Haruhiko Kuroda said in July (http://www.marketwatch.com/story/traders-are-already-testing-the-bank-of-japans-plan-for-more-flexible-bond-trading-2018-08-01) that the central bank would allow the yield on the 10-year bond to fluctuate by as much as 20 basis points on either side of 0%, double the previous range of 0 to 10 basis points.

The 10-year Japanese government bond yield rose 1.2 basis points to 0.130%, while the 40-year bond yield climbed 5.1 basis points to 1.047%, its highest since November.

(END) Dow Jones Newswires

September 21, 2018 08:20 ET (12:20 GMT)