TREASURIES-US yields edge lower as Fed rate decision looms

By Tatiana Bautzer

NEW YORK, Oct 28 (Reuters) - U.S. Treasury yields were slightly lower on Tuesday, with the market in a holding pattern and consolidating moves, as investors awaited the Federal Reserve's interest decision expected on Wednesday.

U.S. data showing private payrolls increased by an average of 14,250 jobs in the four weeks ending October 11 weighed modestly on yields. ADP said on Tuesday it would publish a weekly preliminary estimate of the ADP National Employment Report every Tuesday effective October 28, based on its high-frequency data.

U.S. consumer confidence data was also released, showing a slightly above consensus figure, though the report had little impact on Treasuries.

In late morning trading, the yield on the benchmark U.S. 10-year Treasury note US10YT=TWEB was down 1.4 basis points at 3.984%.

The two-year US2YT=TWEB U.S. Treasury yield, which typically moves in step with interest rate expectations for the Fed, was little changed at 3.498%.

"We do not expect any relevant market moves on Tuesday as investors prepare for the rate decision tomorrow," Vail Hartman, BMO's rates strategist in New York, said.

"There were interesting data points on jobs, but nothing that changed investors' view of the labor market."

The strategist said that ADP data showed an average of 57,000 new jobs in the four weeks through October, higher than the 32,000 average in September. But that was tempered by the layoff announcements by big companies such as Amazon AMZN.O and UPS UPS.N.

"High-profile layoff announcements highlight the risk of a potential higher unemployment rate since hirings have slowed," Hartman said.

Investors are also focused on how the Fed will incorporate the economic effects of the U.S. government shutdown in the policy outlook and if the market is justified in its confidence on another rate cut in December.

Markets largely expect a 25 basis point rate cut to be announced by the Fed on Wednesday. The CME FedWatch tool puts the odds of a second cut in December at 96%.