May 1 (Reuters) - U.S. Treasury yields dipped on Wednesday, after a report showing the labor market remained tight last month, hours before a Federal Reserve decision on whether the economy is too strong, and inflation too sticky, to pivot to an easier rate policy soon.
Yields initially ticked higher on news that U.S. private payrolls increased more than expected in April, while data for the prior month was revised higher. According to the ADP Employment report, private payrolls increased by 192,000 after rising by an upwardly revised 208,000 in March.
But rates were overall hardly moving, nosing off again after the U.S. Treasury Department announced a total refunding of $125 billion for the May to July quarter that would raise new cash of $17.2 billion. It will sell $58 billion in three-year notes, $42 billion in 10-year notes and $25 billion in 30-year bonds.
The yield on benchmark U.S. 10-year notes was down 1.6 basis points from late Tuesday at 4.668%. The 30-year bond yield fell 2 basis points to 4.7692%. The 2-year note yield, which typically moves in step with interest rate expectations, fell 1.9 basis points to 5.0269%.
On the U.S. Treasury yield curve, the gap between yields on two- and 10-year Treasury notes, seen as an indicator of economic expectations, was at a negative 36.2 basis points, slightly less inverted than late Tuesday's -37 bp.
The Federal Open Market Committee concludes its two-day policy meeting later Wednesday and is widely expected to hold its policy rate unchanged at 5.25% to 5.50%.
Bond investors are expecting Fed Chair Jerome Powell to sound hawkish in his press conference, likely noting that the central bank is no rush to cut interest rates given persistent inflation and a still-robust labor market.
There is expectation that the Fed will announce a quantitative tightening slowdown by June, and could flag signs of its plan for its balance sheet reduction at this meeting. (Reporting by Alden Bentley)
