Bond Report: Treasury yields tick lower as Fed policy update, first-quarter GDP comes into focus

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U.S. Treasury yields fell early Wednesday as investors await the outcome of a policy update from the Federal Reserve which has cut its policy interest rate to zero and set up a host of emergency lending programs to cushion the economic damage wrought by the COVID-19 pandemic.

What are Treasurys doing?

The 10-year Treasury note yield TMUBMUSD10Y, 0.608% fell 2.4 basis points to 0.586%. The 2-year note rate TMUBMUSD02Y, 0.207% was down 1.4 basis points to 0.195%, while the 30-year bond yield TMUBMUSD30Y, 1.203% slipped 3.2 basis points to 1.175%. Bond prices move in the opposite direction of yields.

What’s driving Treasurys?

The Fed will stay in focus ahead of its policy update at 2 p.m. ET, followed by a press conference helmed by Fed Chairman Jerome Powell. As the Fed has announced significant measures in the past few weeks to provide monetary stimulus and credit guarantees, the U.S. central bank is not expected to announce new initiatives on Wednesday.

Still, investors say the occasion will offer a chance for Powell to articulate the Fed’s arguments for moving so aggressively, and reassert the Fed’s willingness to step in to limit the economic pain from lockdowns implemented to contain the spread of COVID-19.

See: Fed has simple goal this week — project confidence in face of the unknown

Economic data will also command some attention, with the first official report card of U.S. economic growth for the first quarter due at 8:30 a.m. ET. Analysts polled by MarketWatch forecast a gross domestic product to shrink by 3.9% in the first-quarter, the steepest drop since 2009. Meanwhile, pending home sales in March will later arrive at 10 a.m.

Read: U.S. GDP in the first quarter is going to be bad — and the damage is far from done

What did market participants’ say?

“Events today are dominated by the FOMC meeting this evening which should be light on announcement and specific views. It makes sense at this stage for the central bank to keep all its options open, but to further await how the measures put in place to maintain the functioning of the financial plumbing are taking effect,” said analysts at ING.