NEW YORK: US Treasury yields rose to their highest levels in about two weeks or longer on Wednesday on concern that minutes from the Federal Reserve's last policy meeting could signal another interest rate increase is looming as early as next month.
The move was most pronounced at the front end of the yield curve, with yields on two- and three-year Treasury notes hitting their highest levels in three weeks. Benchmark 10-year notes and 30-year bonds rose to their highest levels in around two weeks.
Improving US economic data and recent comments from US central bank officials about resuming a rate tightening cycle have prompted selling of Treasuries ahead of the release of the minutes from the policy-setting Federal Open Market Committee's April 26-27 meeting, analysts said.
The minutes are due to be released at 2 p.m. EDT (1800 GMT).
The Fed raised rates in December for the first time in nearly a decade. Its next policy meeting is June 14-15.
"Any clue that the probability for a June rate hike is rising is going to make traders nervous at this point," said Jim Vogel, interest rate strategist with FTN Financial.
The probability of a rate increase next month, while still low, has been grinding higher recently, according to market-based measures. CME Group's FedWatch currently puts the likelihood at 19 percent, up from 15 percent on Tuesday and as low as 1 percent a month ago.
Fed officials themselves have said that investors are pricing too few rate increases for 2016.
Atlanta Fed President Dennis Lockhart and San Francisco Fed President John Williams said on Tuesday they expected two or three rate increases this year. Their comments followed surprisingly upbeat data from the Labor Department that showed consumer prices rose last month by the most in three years.
The wait-and-see approach ahead of the Fed minutes has led to low volumes in the Treasury market and an environment where even moderate selling can lead to substantial moves, Vogel said.
An increase in corporate bond supply in the wake of PC maker Dell's $20 billion bond sale on Tuesday has weighed on prices for Treasuries.
The yield for two-year Treasury notes rose as high as 0.863 percent in early trading on Wednesday, the highest level since April 27. The yield was last up around 3 basis points from late Monday at 0.851 percent.
Benchmark 10-year notes fell 13/32 in price to yield 1.804 percent, the highest since May 3. Thirty-year bonds fell more than one point in price to yield 2.466 percent, the highest since May 5.
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