TREASURIES-Yields fall as Fed talks about tapering but sets no timeline

    (Adds quotes, details, updates prices)
    By Karen Brettell
    NEW YORK, July 28 (Reuters) - U.S. Treasury yields fell on
Wednesday after the Federal Reserve flagged ongoing discussions
around the eventual withdrawal of monetary policy support but
gave no details on when it is likely to reduce bond purchases.
    The U.S. economic recovery remains on track despite a rise
in coronavirus infections, the U.S. central bank said in a new
policy statement that remained upbeat.
    Fed policymakers, in a unanimous statement, also said they
were moving ahead with discussions about when to reduce the
central bank's bond-buying program, a precursor to eventually
raising interest rates.
    "The Fed took another small step forward in their patient
and methodical path towards tapering of their bond buying
program," Jason England, global bonds portfolio manager at Janus
Henderson Investors said in a note.
    In a news conference following the release of the statement,
Fed Chair Jerome Powell said the U.S. job market still had "some
ground to cover" before it was time to pull back from the
economic support the U.S. central bank put in place in the
spring of 2020 to battle the coronavirus pandemic's economic
    "I think there's important stuff that Powell would rather
see such as how the end of the pandemic jobless benefits go, how
school reopenings go ... and how the Delta variant evolves over
the next couple of months," said Lou Brien, a market strategist
at DRW Trading in Chicago.
    Powell also said that when the Federal Reserve does begin to
reduce its bond purchases it will likely cut purchases of
mortgage-backed securities at the same pace as Treasuries.

    Benchmark 10-year yields fell to 1.228%, after
briefly rising to a session high of 1.278% immediately after the
    The yield curve between two-year and 10-year notes
 flattened to 102 basis points.
    Fed funds futures traders are pricing for rate hikes to
begin in March 2023.
    The Fed is widely expected to announce a taper this year
with bond reductions not likely to begin until year-end of early
next year. Some analysts expect that an announcement could come
at the Fed's August Jackson Hole Economic Symposium, while
others see that as too soon.
    Powell said on Wednesday he is in the process of writing a
speech to be delivered at the Jackson Hole conference but
declined to say what his remarks will focus on.
    The Fed also said on Wednesday that higher inflation
remained the result of "transitory factors," meaning it was not
an imminent risk.
    Some Fed officials have warned that rising price pressures
may be persistent.
    Breakeven rates on five-year Treasury Inflation-Protected
Securities, a measure of expected annual inflation
for the next five years, rose to 2.63%.
    The Fed also announced that it will establish two standing
repo facilities, one domestic and one for foreign and
international monetary authorities, to backstop money markets
during times of stress.

    July 28 Wednesday 4:20PM New York / 2020 GMT
                               Price        Current   Net
                                            Yield %   Change
 Three-month bills             0.05         0.0507    0.000
 Six-month bills               0.0525       0.0532    0.002
 Two-year note                 99-216/256   0.2035    0.001
 Three-year note               100-10/256   0.3617    0.000
 Five-year note                99-158/256   0.7031    -0.007
 Seven-year note               101-196/256  0.9854    -0.007
 10-year note                  103-168/256  1.2277    -0.006
 20-year bond                  107-116/256  1.8007    -0.003
 30-year bond                  111-36/256   1.8846    -0.004

                               Last (bps)   Net
 U.S. 2-year dollar swap         7.00         0.00
 U.S. 3-year dollar swap        11.00         0.25
 U.S. 5-year dollar swap         7.75        -0.75
 U.S. 10-year dollar swap        1.75         1.50
 U.S. 30-year dollar swap      -25.50         2.25

 (Editing by Sandra Maler)

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