TREASURIES-Yields edge higher before Fed meeting statement

       By Karen Brettell
    NEW YORK, July 28 (Reuters) - U.S. Treasury yields edged
higher on Wednesday before the Federal Reserve is due to
conclude its two-day meeting, with investors focused on any
signals that the U.S. central bank is close to paring bond
purchases or becoming more concerned about high inflation.
    The Fed will conclude its latest policy meeting weighing the
risks of a COVID-19 resurgence in the United States and a
potentially slower economic recovery against a developing
inflation threat that had been its main focus.
    "The focus is going to be on the press conference and what
Chair (Jerome) Powell's thoughts are going to be on tapering,"
said Subadra Rajappa, head of U.S. rates strategy at Societe
Generale in New York.
    "The thing that we would be looking to hear is hints on when
they might start tapering asset purchases, and perhaps the pace
of tapering asset purchases once they begin, whether they favor
tapering MBS sooner than Treasuries as well as perhaps what the
criteria are for when they feel that the economy has reached
substantial further progress on employment as well as
inflation," Rajappa said.
    Powell has said that high inflation readings are likely
temporary as the economy reopens from COVID-related business
shutdowns and has expressed concerns about the labor market
recovery. Some Fed officials, however, have warned that rising
price pressures may be persistent.
    Treasury yields are trading near five-month lows, reflecting
a bearish view of the economy.
    Benchmark 10-year Treasury yields rose three
basis points on Wednesday to 1.268%. They fell to 1.128% on July
20, the lowest since February.
    The yield curve between two-year and 10-year notes
 steepened two basis points to 106 basis points.
It reached 94 basis points on July 20, the flattest since
    Breakeven rates on five-year Treasury Inflation-Protected
Securities, a measure of expected annual inflation,
rose two basis points to 2.61%.

      July 28 Wednesday 9:18AM New York / 1318 GMT
                               Price        Current   Net
                                            Yield %   Change
 Three-month bills             0.05         0.0507    0.000
 Six-month bills               0.05         0.0507    0.000
 Two-year note                 99-214/256   0.2075    0.005
 Three-year note               100-2/256    0.3723    0.010
 Five-year note                99-120/256   0.7335    0.024
 Seven-year note               101-136/256  1.0203    0.028
 10-year note                  103-72/256   1.2677    0.034
 20-year bond                  106-200/256  1.8397    0.036
 30-year bond                  110-64/256   1.9215    0.032

                               Last (bps)   Net
 U.S. 2-year dollar swap         7.25         0.25
 U.S. 3-year dollar swap        11.00         0.25
 U.S. 5-year dollar swap         7.50        -1.00
 U.S. 10-year dollar swap        0.75         0.50
 U.S. 30-year dollar swap      -27.25         0.50

 (Editing by Bernadette Baum)

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