Treasuries Give Back Ground Following Fed Minutes But Remain Positive


After moving sharply lower over the course of the previous session, treasuries regained some ground during trading on Wednesday.

Bond prices pulled back off their best levels late in the session but remained in positive territory. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 3.2 basis points to 3.923 percent.

Treasuries benefited from bargain hunting following recent weakness, which drove the ten-year yield to its highest levels in over three months.

However, buying interest waned late in the day following the release of the minutes of the Federal Reserve’s January 31-February 1 monetary policy meeting.

The minutes revealed a “few participants” favored raising rates by 50 basis points compared to the 25 basis point rate hike that was ultimately announced.

“The participants favoring a 50-basis point increase noted that a larger increase would more quickly bring the target range close to the levels they believed would achieve a sufficiently restrictive stance, taking into account their views of the risks to achieving price stability in a timely way,” the Fed said.

The Fed members eventually agreed to raise the target range for the federal funds rate by 25 basis points to 4.50 to 4.75 percent.

The smaller rate hike came after the central bank raised rates by 75 basis points in November and by 50 basis points in December.

The minutes noted all participants continued to anticipate that ongoing rate increases would be appropriate to achieve the Fed’s dual goals of maximum employment and inflation at the rate of 2 percent over the longer run.

The minutes acknowledged that inflationary pressures have moderated but noted price growth remains well above the Fed’s 2 percent target, with labor market tightness contributing to continuing upward pressures on wages and prices.

“Overall, the minutes continued to underscore that the FOMC maintains a hawkish posture as its main goal is to significantly lower inflation,” said Nationwide Chief Economist Kathy Bostjancic.

She added, “And this requires economic growth to be below its potential growth rate, which is estimated to be around 1.8%, for some period of time.”

The Fed’s next monetary policy meeting is scheduled for March 21-22, with CME Group’s FedWatch Tool currently indicating a 79.0 percent chance of another 25 basis point rate hike and a 21.0 percent chance of a 50 basis point rate hike.

Reaction to the Fed minutes may continue to impact trading on Thursday, while a report on weekly jobless claims is also likely to attract attention.

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