Treasurys Lose Early Gains; Investors Anxious Ahead of Fed Decision, Auctions
U.S. Treasury bonds pulled back after an early price gain, underscoring some uneasiness among traders and investors ahead of the Federal Reserve's next decision on its monetary stimulus for the economy.</br></br>The Federal Open Market Committee is scheduled to start a two-day monetary policy meeting Tuesday with an interest-rate statement due at about 2 p.m. EST Wednesday.</br></br>Market participants will zero in on whether the Fed will announce plans to dial back, or "taper," its bond purchases. The central bank's $85 billion-a-month purchases in Treasurys and mortgage-backed securities have been a major factor holding Treasury yields near historic lows.</br></br>Traders, investors and analysts believe an improving economy would allow the Fed to start winding down its monetary stimulus. The Fed could act this week or wait until early January to cut bond buying, they said, though they believe the central bank would wind down its monetary stimulus on a gradual basis, which is likely to prevent a sharp rise in bond yields.</br></br>"We do think the odds of a December taper have gone up," said Russ Koesterich, global chief investment strategist at BlackRock Inc. "That said, the more likely time frame is early 2014, a view supported by the fact that inflation continues to remain low, allowing the Fed more latitude."