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US Treasury Debt Prices Steady Before Fed Minutes

Reuters
Tuesday, 9 Oct 2007 | 8:16 AM ET

US Treasury debt prices were steady early Tuesday as investors looked ahead to the release of minutes from the Federal Reserve's policy meeting last month when the central bank cut benchmark interest rates.

The minutes from the Sept. 18 meeting will be closely parsed for clues to the thinking behind the Fed's decision to cut rates by 50 basis points, which marked the first such ease in monetary policy in more than four years.

The Fed said in its policy statement that it took the action to "forestall" adverse effects on the economy from a slowdown in housing and tightening credit conditions.

However, stronger-than-expected monthly payrolls data late last week has since soothed some market fears about stalling economic growth.

Analysts are mulling whether the Fed will deem it necessary to cut rates again at a meeting later this month.

"Today, the August Federal Open Market Committee minutes are likely to show the preventative nature of the September rate cut and open mindedness about future policy," said Christopher Low, chief economist at FTN Financial in New York, adding "the fact that the future of policy is not 100% clear should be no shock after Friday's employment report."

Ahead of the release of the Fed minutes Tuesday afternoon, benchmark 10-year notes were flat in price for a yield of 4.64%, while 2-year notes were also unchanged in price for a yield of 4.09%.

The US bond market was closed Monday for the Columbus Day holiday.

US stock futures were slightly higher early Tuesday ahead of the beginning of earnings reporting season.

Fed fund futures on Tuesday morning implied a 42% probability that the Fed would cut interest rates by a quarter point at their Oct. 30-31 meeting.

Before the Fed minutes, traders will have an early indication of the level of consumer confidence this month with the release of the economic optimism index for October from Investor's Business Daily and TechnoMetrica Market Intelligence.

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