Treasuries Move Modestly Lower Following Fed Minutes

(RTTNews) - After recovering from initial weakness, treasuries showed a modest move back to the downside in afternoon trading on Wednesday.

Bond prices bounced back near the unchanged line after the initial drop but slid back into the red. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, rose 2.0 basis points to 4.434 percent.

The modest pullback by treasuries came following the release of the minutes of the latest Federal Reserve meeting, which suggested officials expect to maintain interest rates at current levels longer than previously thought.

The minutes of the April 30-May 1 meeting said participants highlighted disappointing readings on inflation over the first quarter and indicators pointing to strong economic momentum.

The participants subsequently assessed that it would take longer than previously anticipated for them to gain "greater confidence" inflation is moving sustainably toward 2 percent.

With Fed officials repeatedly saying they need "greater confidence" inflation is slowing before they cut rates, the minutes said participants discussed maintaining the current restrictive policy stance for longer.

While officials also discussed reducing policy restraint in the event of an unexpected weakening in labor market conditions, various participants also mentioned a willingness to raise rates further should risks to inflation materialize in a way that such an action became appropriate.

"The investing world will have to wait at least another month to hear anything about rate cuts but the kicker in this report was the willingness of some participants to restrict policy further which apparently according to the markets action was quite the surprise," said Alex McGrath, Chief Investment Officer for NorthEnd Private Wealth.

Looking ahead, trading on Thursday may be impacted by reaction to reports on weekly jobless claims and new home sales.