NEW YORK: Short- and medium-dated US Treasuries yields rose modestly on Thursday, bouncing off multi-week lows on the view that the Federal Reserve is still moving closer to tightening monetary policy despite its recent dovish statement.
Yields on Treasury notes maturing within two to 10 years edged higher after plunging on Wednesday after the Fed cut its inflation outlook for 2015 and its forecast for US economic growth following a two-day policy meeting.
Yields on maturities between three and 30 years hit fresh multi-week lows early in the session as the Fed's impact lingered.
The Fed statement surprised markets by suggesting a less aggressive timeline for raising interest rates. Investors digested the statement on Thursday, however, and renewed their awareness that a 2015 rate hike was still probable.
"People don't want to be that heavily involved in the rate market right now because it can swing either way," said Robbert van Batenburg, director of market strategy at brokerage Newedge USA LLC in New York. "A good set of data and you're back to expectations of a June rate hike."
A majority of Wall Street's top banks now see the Fed holding off until at least September before raising rates, a Reuters poll showed.
The muted inflation outlook helped long-dated Treasury yields edge lower and hover near an almost six-week low of 2.5 percent hit early in the session.
US 30-year prices were last up 6/32 in price to yield 2.53 percent.
Longer-dated US bonds benefit from a lack of inflation since inflation erodes the value of interest rate payouts.
"Investors are saying: the Fed's telling me that inflation is going to stay low, oil prices are low, and that's really favorable for anybody going out far on the yield curve," said Stan Shipley, bond strategist at Evercore ISI in New York.
The US bond market's gauge of inflation expectations in the next 10 years, meanwhile, climbed to its strongest in more than a week following robust demand at a $13 billion auction of 10-year Treasury Inflation-Protected Securities.
Benchmark 10-year notes were last down 8/32 in price to yield 1.98 percent, from a yield of 1.95 percent late Wednesday.
US five-year notes were last down 8/32 in price to yield 1.48 percent, from a yield of 1.42 percent late Wednesday. Three-year notes were last down 5/32 in price to yield 1 percent, from a yield of 0.94 percent late Wednesday.
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