NEW YORK: US Treasuries yields rose on Wednesday after the US Federal Reserve tweaked its message on interest rates, saying that while it was in no hurry to raise them, it will monitor data on growth and inflation to decide on the timing of such a move.
Trading in the bond market swung wildly after the release of the latest policy statement from the Federal Open Market Committee after its two-day meeting.
"Based on its current assessment, the committee judges that it can be patient in beginning to normalize the stance of monetary policy," the FOMC said.
Significantly, it viewed that statement as "consistent" with its previous language that it would be a "considerable time" before it hiked rates.
Some traders had bet that the steep decline in oil prices and overseas economic woes would force the Fed to leave short-term rates near zero at least into late 2015, which is later than the mid-2015 target that some Fed policymakers had suggested.
But Fed Chair Janet Yellen played down the drop in oil prices and possible market contagion at a press conference after the FOMC meeting. She said the huge drop in energy costs would ultimately be a "net positive" for the US economy since it will help consumer spending.
Oil's retreat has caused stress in stock markets and some credit sectors as well as for energy exporters, including Russia, whose currency has seen a near free-fall.
An early result of the steep decline in energy costs was the unexpectedly big drop in the US consumer price index in November. The CPI's 0.3 percent fall last month was the biggest in nearly six years.
"Today's CPI report is a reminder on how low inflation has fallen," said Mike Lorizio, head of Treasuries trading at John Hancock Asset Management in Boston.
After Yellen's press conference, benchmark 10-year note yield was 2.136 percent, up 6.5 basis points from late on Tuesday, while 30-year bond yield rose 4.1 basis points at 2.743 percent.
Short-to-medium Treasuries yields rose 4 to 7 basis points.
In the oil market, January US crude futures ended higher for a second day, up 54 cents at $56.47 a barrel after touching a 5-1/2-year low of $53.60 on Tuesday.
The rebound in crude prices helped Treasury Inflation-Protected Securities (TIPS) after the weaker-than-expected CPI data had weighed on the sector.
The five-year TIPS inflation break-even rate , a gauge of investors' five-year inflation outlook, was up 1 basis point at 1.16 percent after it fell on Tuesday to 1.08 percent, which was the lowest since September 2010, Reuters data showed.
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