Treasuries Close Lower Following Some Volatility After Fed Minutes

(RTTNews) - After coming under pressure in early trading on Wednesday, treasuries saw some volatility following the release of the minutes of the latest Federal Reserve meeting but still ended the day in the red.

Bond prices initially rebounded in response to the Fed minutes but moved back to the downside going into the close. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 2.9 basis points to 2.351 percent.

The lower close by treasuries came as the minutes of the Fed's October monetary policy meeting suggested that the central bank was not worried about the sell-off on Wall Street and signs of economic weakness overseas.

While the Fed acknowledged a somewhat weaker economic outlook and increased downside risks in Europe, China, and Japan, many participants saw the effects on the domestic economy as likely to be quite limited.

The minutes also showed that the members of the Fed debated how best to communicate their outlook for higher interest rate hikes.

The Fed's statement reiterated its pledge to keep rates at historically low levels for a "considerable time," although the minutes said some members wanted to remove that statement in favor of a more specific time line.

Others worried that removing the phrase would unduly signal a significant shift in policy, resulting in tighter market conditions.

Paul Ashworth, Chief U.S. Economist at Capital Economics, said, "Overall, there is nothing here to suggest that the market volatility persuaded officials to push back their expectations of when the first rate hike would be required next year."

The early weakness among treasuries may have partly reflected a Commerce Department showing a drop in housing starts, although the report also showed a jump in building permits.

A slew of U.S. economic data is likely to be in focus on Thursday, with traders likely to keep an eye on reports on consumer prices, jobless claims, and existing home sales.