NEW YORK: US Treasury prices rose on Thursday as markets rebounded from Wednesday's sell-off and priced down the odds of a Federal Reserve interest rate increase after evenhanded remarks from New York Fed President William Dudley.
US Treasury yields, which move in the opposite direction of prices, rose to their highest in about two months for shorter-dated maturities after the Fed's April 26-27 meeting minutes were released late on Wednesday.
In the minutes, Fed officials said they were open to a rate hike in June if the economy continues to improve. Prices moved higher on Thursday after markets got limited commentary from the Fed's Stanley Fischer and non-committal remarks from Dudley.
"The market was rallying even prior to Dudley and I don't think he said much new today but he seems to be tempering the hawkish sentiment that we saw yesterday after the minutes," said Subadra Rajappa, head of US rates strategy at Societe Generale in New York. "I think Dudley was very non-committal. I didn't feel like I got anything new out of him."
Dudley is considered by many investors to be among the most important voices on the Fed's Federal Open Market Committee, which sets US overnight interest rates.
Markets were looking to his speech to confirm or deny whether the FOMC was truly biased toward a hike, analysts said.
Fed funds futures rates showed that following the release of the minutes on Wednesday, investors doubled the likelihood of a rate increase from the Fed in June, to 34 percent from 17 percent, according to CME group's FedWatch tool.
The likelihood fell to 26 percent after Dudley's speech on Thursday.
A rate increase would be negative for Treasuries because it would drive up overall interest rates, lowering the relative value of already-issued government debt.
"People look at (the market) and say that if June is not eminent then we should trade a little lower and there's a tremendous amount of demand for Treasuries," said Societe's Rajappa.
"I think despite yesterday's hawkish minutes, markets still believe June is going to be tough."
Two-year Treasury notes rose 1/32 in price to yield 0.88 percent. Yields on the two-year note rose to as high as 0.92 percent in earlier trading, a two-month high.
Benchmark 10-year notes rose 10/32 in price to yield 1.85 percent.
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