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Treasuries End Mostly Flat

Treasuries ended Tuesday's session little changed to slightly higher, mostly on dull position squaring. The FOMC meeting provided absolutely no excitement for the markets, either in the run up to the announcement or in the post-statement trade. Indeed, the Fed fully met expectations for a steady 1-1/4% rate target, a balanced risk assessment, and a terse policy statement (note eurodollar traders booed).

The FOMC's only real "non-boilerplate" sentence in the press release was that recent data were "not inconsistent" with the economy working through its soft spot. Bonds were very quiet through the morning. The market took little notice of the mix in the weekly chain store sales figures (BTM-UBSW -2.3% and Redbook +0.6%), the slippage in the wholesale trade data, the drop in the Richmond Fed index, or the final dribs and drabs in corporate supply.

The short end did tend to underperform, however, ahead of the Fed statement. Traders noted too some unwinding of the recent curve steepening trade given the anticipation of the "Fed on hold" scenario. Modest gains in stocks also kept the shorter notes at bay and the two-year note and 30-year bond spread narrowed about 6 basis points back toward +302 basis points.

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