NEW YORK: US Treasury yields fell from multiyear highs on Wednesday after the Treasury Department saw very strong demand for an auction of seven-year notes, and after minutes from the Federal Reserve's November meeting contained no large surprises.
The Treasury sold $28 billion of seven-year notes at a high yield of 2.215 percent, around two basis points below where they traded before the auction. Indirect bidders, which includes fund managers and some central banks, took a record 73 percent of the sale.
Federal Reserve policymakers, meanwhile, appeared confident that the economy was strengthening enough to warrant rate increases soon, minutes showed.
"It looks like everything is on the path for a hike in the next meeting," said Tom di Galoma, managing director at Seaport Global in New York, adding that "the rate backup has certainly given them the latitude to move."
Yields jumped earlier on Wednesday, with two-year notes hitting the highest levels since April 2010, as investors fretted that the recent bond selloff, sparked by Donald Trump's surprise election as US president on Nov. 8, has further room to run.
"People are very focused on the process of figuring out where yields peak in the selloff. I don't think the market believes we've definitively hit a (price) floor yet," said Ian Lyngen, head of US rates strategy at BMO Capital Markets in New York.
Investors are betting that Trump will adopt policies that increase spending, and debt, as well as spur higher growth and inflation.
That view was boosted by data on Wednesday that showed new orders of US manufactured capital goods rebounded in October, while consumer sentiment jumped this month in the wake of Trump's election.
Short-and intermediate-dated debt has come under additional pressure this week as the government sold $88 billion in two-, five- and seven-year notes, and as investors worry about that the Federal Reserve may raise rates faster than previously expected.
Futures traders are pricing in a 94-percent chance that the Fed will raise rates for the first time this year when its policymakers meet next month, according to the CME Group's FedWatch Tool.
Two-year notes fell 2/32 in price to yield 1.13 percent, after rising as high as 1.15 percent earlier, the highest since April 6 2010.
US benchmark 10-year Treasury notes dropped 9/32 in price to yield 2.35 percent, after earlier rising to 2.42 percent, the highest since July 15, 2015.
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