Yields edge up as Fed reinforces stance

US Treasury yields were little changed on Wednesday as equities were choppy in the early portion of the trading session, while comments from a Federal Reserve official reinforced the central bank's new policy stance.

The yield on the 10-year remained within the 6-basis-point range it has held since the Fed's most recent policy statement on Sept. 16.

On Wednesday, Federal Reserve Vice Chair Richard Clarida said policymakers "are not even going to begin thinking" about raising interest rates until inflation hits 2%, comments aimed at cementing the public's understanding of the central bank's new approach to monetary policy.

Cleveland Federal Reserve Bank President Loretta Mester said the economy has rebounded more strongly than expected since businesses began to reopen a few months ago, but the recovery is not broad-based or sustainable and monetary policy will need to remain accommodative for several years.

"The Fed is trying to make sure they don't really move markets here," said Gennadiy Goldberg, interest rates strategist at TD Securities in New York.

"We are still trying to figure out exactly what the next steps are on Capitol Hill. ... It certainly is kind of a waiting and watching type of environment."

On Tuesday, the Democratic-led US House of Representatives passed a stopgap funding bill to keep the federal government operating through Dec. 11 after striking a deal with Republicans. However, another round of coronavirus aid remains stalled.

The yield on 10-year Treasury notes was up 1.5 basis points at 0.679 percent.

Fed Chair Jerome Powell began testimony before the House Select Subcommittee on the coronavirus crisis at 10 a.m. EDT (1400 GMT).

In US economic data, the September flash composite PMI reading from Markit came in at 54.4, down slightly from the 54.6 in August as an improvement in factories was offset by a pullback in services industries.

The two-year US Treasury yield, which typically moves in step with interest rate expectations, was up 0.1 basis point at 0.137 percent.

A closely watched part of the US Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes, seen as an indicator of economic expectations, was at 54 basis points, rebounding from a two-week low of 51.2 hit on Monday.