NEW YORK: US Treasury debt yields rose on Wednesday ahead of the release of minutes from the latest Federal Reserve meeting, which investors believed would show a central bank optimistic about the U.S. economy and ready to raise interest rates next year.
Treasuries were also pressured by the expected new issuance of Alibaba Group Holding's $8 billion corporate bond deal, traders said. Asset managers are selling Treasuries to make way for the Alibaba deal.
For now though, the focus has been on the Fed minutes to be released later in the session. Investors want to find out if the comments of the Fed committee members in the minutes affirm the more hawkish policy statement released more than two weeks ago.
"There's selling ahead of the Fed minutes," said Tom di Galoma, head of credit and rates trading at ED&F Man in New York. "There's a lot of pressure on the Fed to raise rates. And the consensus is that the Fed is looking to raise rates. Whether they do it or not is another question."
In mid-morning trading, benchmark 10-year U.S. Treasury notes were down 4/32 in price to yield 2.33 percent from 2.32 percent late Tuesday. Five-year notes were down 4/32, yielding 1.63 percent.
U.S. 30-year Treasury bonds were down 8/32 in price, with a yield of 3.05 percent, from 3.04 percent at the close on Tuesday.
Benchmark 10-year note and 30-year bond yields hit session highs after data showed starts for U.S. single-family homes rose for a second straight month in October and overall building permits approached a 6-1/2-year high.
But Craig Dismuke, chief economist at Vining Sparks in Memphis, Tennessee, was not as upbeat on the housing sector, although he noted that the stronger-than-expected permits boded well for next month's housing data.
He said since mortgage rates started to rise last May, almost every housing metric has flat-lined.
"We are on track for home price increases slowing to about 3 percent by year end," Dismuke said. "The Fed has to be cautious to not allow longer-term rates to rise because the housing recovery has stalled with this very small increase in mortgage rates."
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