Treasuries Pull Back Sharply Amid Renewed Fed Worries

(RTTNews) - After initially showing a lack of direction, treasuries came under considerable selling pressure over the course of the trading day on Wednesday.

Bond prices pulled back sharply in afternoon trading, ending the day firmly in negative territory. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, jumped 8 basis points to 2.792 percent.

With the increase on the day, the ten-year yield more than offset the downward move seen over the past few sessions to reach its highest closing level in two months.

The pullback by treasuries was partly due to renewed concerns about the outlook for the Federal Reserve's stimulus program.

Adding to the concerns, the minutes of the Fed's October monetary policy meeting noted that the central bank could decide to slow the pace of its asset purchases at one of its next few meetings.

The minutes showed that the Fed members generally expect incoming economic data to be consistent with their outlook and thus warrant trimming the pace of purchases in coming months.

Peter Boockvar, chief market analyst at the Lindsey Group, said, "In other words, the dependency on the data will be key as it's been and if the data comes in as they forecast, a change in policy will begin."

"That said, the Fed's record of forecasting has left a lot to be desired so we must take a wait and see ourselves with the incoming economic numbers," he added.

Some meeting participants argued that it could even be appropriate to begin to winding down the program before an unambiguous further improvement in the outlook was apparent.

The minutes said a couple of Fed members also suggested that officials should start laying the groundwork for tapering in public statements and speeches.

As a result of the focus on the Fed minutes, traders largely shrugged off this morning's slew of economic data, including reports showing stronger than expected retail sales growth and a notable drop in existing home sales.

While trading on Thursday may continue to be impacted by worries about the Fed, reports on weekly jobless claims, producer prices, and Philadelphia-area manufacturing activity may also attract attention.