NEW YORK: US Treasury prices fell on Wednesday as minutes of the Federal Reserve's January meeting showed members supported continued tapering of the central bank's bond-buying program in the absence of a significant change in the economy.
The minutes showed members on the Fed's policy-setting committee wanted to affirm that its asset-purchase program would be trimmed in predictable $10 billion steps.
The Fed is seen likely to continue paring its monthly purchases as Fed members view much of the recent economic weakness as a temporary phenomenon that is due to unseasonably cold weather.
"It suggests that they see the recent weakness in economic activity as fairly transitory. They don't think this is a permanent trend.
Even if we see lower growth in 2014 they will still continue to taper," said Gennadiy Goldberg, an interest rate strategist at TD Securities.
"It puts a bit of upward pressure on interest rates. If there was anyone thinking the Fed would show debate about slowing purchases, it is not there," Goldberg said.
Benchmark 10-year notes fell 6/32 in price to yield 2.74 percent after the FOMC minutes, erasing earlier price gains, up from 2.71 percent late on Tuesday. Thirty-year bonds gained 16/32 in price to yield 3.71 percent, up from 3.68 percent.
The Fed said in December that it had decided to taper its bond purchases by $10 billion a month and followed that up last month by announcing another $10 billion reduction.
The US central bank bought $1.25 billion in bonds due between February 2036 to August 2043 on Wednesday as part of its ongoing bond purchase program. It will purchase between $2.25 billion and $2.75 billion in notes due 2021 to 2024 on Thursday.
Yields on 10-year Treasuries have traded in a range of around 2.65 percent to 2.80 percent for the past two weeks, and new signals on the direction of the economy in the wake of the recent weak data are likely needed to break out of the range.
"It has to be some kind of confirmation that the economic slowdown is for real rather than just weather-related.
We need a real confirmation of a different change in Fed policy or a different economic landscape where people are confident about the results that are coming out for the market to move dramatically," said Tom Tucci, head of Treasuries trading at CIBC in New York.
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