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Traders slowed their selling of U.S. Treasuries on Wednesday, leaving yields little changed, as they kept an eye on government budget talks in Washington.

The benchmark 10-year yield was up 1 basis point at 1.5462 per cent while yields on shorter-term debt were lower. After four consecutive sessions in which the 10-year yield rose, the yield fell as low as 1.494 per cent on Wednesday morning before finding support.

Analysts said investors were taking stock after Treasury market moves of recent days and trying to forecast how negotiations on U.S. spending plans might resolve.

“The momentum is all on the bear side of this,” said Kim Rupert, senior economist for Action Economics.

Major Wall Street indexes were higher, boosted by technology stocks and aircraft maker Boeing Co.

Congress on Wednesday was facing a two-day deadline until the federal government begins shutting many of its operations unless Democrats in Congress reach a deal to provide funding for the fiscal year that begins Friday.

For now, investors expect some kind of deal that avoids big disruptions to the Treasury market, said Rupert of Action Economics and Padhraic Garvey, head of research for ING Americas. But a continued impasse would eventually pressure the market, for example if ratings agencies downgraded the United States.

In addition, investors are focused on when the Federal Reserve may begin to unwind its support for the economy, though the Fed has indicated it still needs to see further progress toward its employment and inflation goals.

“There’s headwinds out there, and it does make sense for us to have a bit of a pause here,” Garvey said.

On Tuesday, U.S. Treasury Secretary Janet Yellen again warned the government was close to exhausting its borrowing capabilities – now set for Oct. 18. The deadline has worried the market for Treasury bills with yields on short-term debt now higher than some longer-term issues. The yield on the one-month bill spiked as high as 0.086 per cent on Tuesday, the highest since the first quarter of 2021. It fell back on Wednesday and was last at 0.0507 per cent after U.S. House of Representatives Speaker Nancy Pelosi said Congress will move to pass legislation that would suspend the debt limit.

The trading left little changed a closely watched part of the U.S. Treasury yield curve measuring the gap between yields on two– and 10-year Treasury notes, seen as an indicator of economic expectations. It was at 124 basis points, about the same as Tuesday’s close.

The two-year U.S. Treasury yield, which typically moves in step with interest rate expectations, was down about a basis point at 0.299 per cent.

The 10-year TIPS yield was at –0.833 per cent and the breakeven inflation rate was at 2.396 per cent.

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