US long-dated Treasury debt yields edged lower on Wednesday in choppy trading, after minutes of the latest Federal Reserve monetary policy meeting struck a cautious tone on raising interest rates, reducing expectations of a hike next month. According to the minutes released on Wednesday, many Fed policymakers said it may be appropriate to raise rates again "fairly soon" should jobs and inflation data come in line with expectations.
"The minutes are fairly dovish," said Jeff Kravetz, regional investment director at US Bank Wealth Management in Scottsdale, Arizona. "The language used was 'fairly soon' that they want to raise rates, which is a cautious statement." Fed officials were concerned about the lack of clarity on the new Trump administration's economic program, which has clouded the outlook for monetary policy.
After the release of the minutes, the Fed funds futures market was pricing in a roughly 18 percent chance of a March rate hike, down from 22 percent on Tuesday, according to the CME Group's FedWatch. US 10-year notes were last up 2/32 in price to yield 2.421 percent, compared with 2.427 percent on Tuesday. Yields fell as low as 2.391 percent, their lowest level since Feb. 9.
US 30-year bond prices were almost flat, yielding 3.040 percent. Yields earlier dropped to 2.999 percent, their lowest in two weeks. US two-year note prices were also flat in price, yielding 1.224 percent, compared with 1.23 percent late on Tuesday. The US Treasury's $34 billion 5-year auction came out weak, with the note clearing at 1.937 percent, higher than expectations of 1.930 percent at the bid deadline. There were $77.9 billion in bids for a 2.29 cover, versus 2.38 last month and the 2.44 average. Indirect bidders took just 58.2 percent, also below the prior month's take of 63.3 percent and the 62.2 percent average.
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