Treasury bond market mixed as traders await Fed move

The Treasury bond market was mixed in a quiet day of trading Friday, as bond buyers look toward an upcoming meeting of the Federal Reserve.

The 10-year note was down 12.5 cents to $100.53, raising the yield to 2.56 percent from 2.54 percent late Thursday. The yield on the 30-year bond slipped to 3.93 percent from 3.95 percent, as the price rose 43.7 cents on the dollar to $98.90. Bond prices and yields move in opposite directions.

Traders say yields will hover in a tight range until the Fed's two-day meeting begins Nov. 2. That's when many expect the Fed will launch a large-scale effort to push down interest rates through buying more Treasurys. The rough estimate from investors and bond strategists is that the Fed will acquire around $500 billion in total, picking up bonds in batches from month to month.

James Bullard, president of the St. Louis Fed, told reporters Thursday that he'd like the central bank to consider buying $100 billion to start, then add more each month depending on the health of the economy.

A new batch of government bonds will hit the market next week, when the Treasury auctions $109 billion in notes. Money managers, central banks and investors from around the world will bid on $35 billion in two-year notes, $35 billion in five-year notes, $29 billion in seven-year notes and $10 billion in inflation-protection bonds coming due in 2015.

In other trading, the two-year note's yield held tight at 0.36 percent, unchanged from the previous day. The yield on the three-month T-bill paid a 0.12 percent yield at a discount of 0.13 percent.