Treasuries Pull Back Off Best Levels But Still Close Higher

(RTTNews) - Following the strength see in the previous session, treasuries saw some further upside during the trading day on Wednesday.

Treasuries pulled back off their best levels late in the day but remained in positive territory. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, dropped by 2.2 basis points to 2.477 percent.

The higher close by treasuries came after the minutes of the Federal Reserve's latest monetary policy meeting suggested the outlook for interest rates remains fluid.

The minutes said a majority of meeting participants expected that the evolution of the economic outlook and risks to the outlook would likely warrant leaving rates unchanged for the remainder of the year.

Several of these participants saw the current target range for rates of 2.25 to 2.50 percent as close to their estimates of its longer-run neutral level.

However, the minutes noted participants continued to emphasize that future rate decisions would depend on their ongoing assessments of the economic outlook and potential risks.

"Several participants noted that their views of the appropriate target range for the federal funds rate could shift in either direction based on incoming data and other developments," the minutes said.

Some participants even indicated it would be appropriate to raise rates modestly later this year if the economy evolves as they currently expect.

With regard to the economic outlook, the minutes said participants continued to view a sustained economic expansion, strong labor market conditions, and inflation near the Fed's 2 percent target as the most likely outcomes over the next few years.

"Nevertheless, participants generally expected the growth rate of real GDP this year to step down from the pace seen over 2018 to a rate at or modestly above their estimates of longer-run growth," the Fed said.

A number of participants judged that economic growth in the remaining quarters of 2019 and in the subsequent couple of years would likely be a little lower than they had previously forecast.

The downward revisions were attributed to disappointing news on global growth and less of a boost from fiscal policy than had previously been anticipated.

The minutes noted that the meeting also featured continued discussions on options for transitioning to the longer-run size of the balance sheet.

On the U.S. economic front, the Labor Department released a report showing a spike in energy prices contributed to a slightly bigger than expected increase in consumer prices in the month of March.

The Labor Department said its consumer price index climbed by 0.4 percent in March after edging up by 0.2 percent in February. Economists had expected the index to rise by 0.3 percent.

Excluding the jump in energy prices and a modest increase in food prices, core consumer prices inched up by 0.1 percent in February, matching the uptick seen in the previous month. Core prices had been expected to tick up by 0.2 percent.

Meanwhile, the Treasury Department's auction of $24 billion worth of ten-year notes attracted slightly above average demand.

The ten-year note auction drew a high yield of 2.466 percent and a bid-to-cover ratio of 2.55, while the ten previous ten-year note auctions had an average bid-to-cover ratio of 2.50.

The bid-to-cover ratio is a measure of demand that indicates the amount of bids for each dollar worth of securities being sold.

Looking ahead, the Treasury is due to finish off this week's long-term securities auctions with the sale of $16 billion worth of thirty-year bonds on Thursday.

Reports on weekly jobless claims and producer prices may also attract attention on Thursday along with remarks by several Fed officials.