By Dow Jones Business News,
July 09, 2014, 03:29:00 PM EDT
By Ben Eisen, MarketWatch
NEW YORK (MarketWatch)--Treasury prices turned higher Wednesday after minutes from the Federal Reserve's latest policy
meeting left expectations intact for the timing of interest-rate increases.
The minutes showed that the central bank plans to finish winding down its bond-buying stimulus program in October. The
committee members also discussed how to exit current low-rate policies, but gave no indications that increases to key
policy rates were coming sooner than the market anticipated.
"Overall, the market reaction is fairly tame. Yields are very close to where they ended yesterday. It doesn't seem
like there is anything that changed expectations too much," said Collin Martin, senior research analyst for fixed income
at Charles Schwab.
The 10-year Treasury note (10_YEAR) yield, which falls as prices rise, was down 1.5 basis points on the day at 2.549%.
Before swinging lower, the benchmark yield had climbed after a weak auction of $21 billion worth of 10-year notes, in
which non-dealers bought a smaller portion of the debt than during recent sales.
Shorter-term yields, which are sensitive to shifts in expectations about Federal Reserve monetary policy, have been on
the rise as investors recalibrate forecasts toward earlier hikes to the central bank's key lending rates.
The 3-year yield (3_YEAR) traded above 1% for most of the day, topping that level for the first time since 2011. The
yield swung lower to trade down 2.5 basis points at 0.973%.
Nonetheless, investors still view rate-hike timing as more subdued than the consensus outlook published by the Fed.
Futures contracts tied to the fed funds rate project the first rate hike occurring in June 2015, according to CME
"The gap between the market view of rates and the Fed's summary of economic projections is smaller than it was a few
weeks ago, but it's still wide, suggesting the market is discounting [the Fed] significantly," said Jake Lowery,
portfolio manager with Voya Investment Management.
The 5-year note (5_YEAR) yield fell 2.5 basis points at 1.673%, while the 30-year bond (30_YEAR) yield fell 1.5 basis
points to 3.367%.
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