US Treasuries retreat as Fed upbeat on economy

Tue Aug 10, 2004

NEW YORK, Aug 10 (Reuters) - Treasuries prices turned lower on Tuesday after the Federal Reserve hiked interest rates and took a generally optimistic view on the economic outlook.

The benchmark 10-year note (US10YT=RR: Quote, Profile, Research) lost all its early gains to dip 2/32 in price, lifting its yield to 4.28 percent from 4.26 percent late Monday. Interest rate futures priced in a slightly greater risk of another hike at the Fed's next meeting in September.

As expected, the Fed raised its benchmark federal funds rate by a quarter percentage point to 1.5 percent, the second hike this year. In its statement, the Fed noted that the labor market had slowed and linked it in part to high energy prices, but stated that the economy appeared poised to resume stronger growth going forward.

The Fed also disappointed some bond bulls by focusing on price stability rather than economic growth in the last part of its statement.

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