Ten-year notes rose 2/32 in price to yield 2.17 percent , compared with 2.18 percent in late US trade, helped by Asian investors buying to extend the duration of their portfolios in line with bond indexes.
US Treasury prices jumped on Tuesday as a slump in consumer confidence fuelled bets for more stimulus from the Federal Reserve. The Conference Board said its gauge of consumer sentiment sank to 44.5 in August, the lowest in more than two years.
The minutes from the Fed's Aug. 9 policy meeting showed the central bank at that time considered a range of action to help the country's struggling economy, with some officials calling for bold new steps.
Those factors helped to fan expectations that more policy accommodation will be forthcoming after the Sept. 20-21 FOMC meeting.
The minutes showed Fed policy makers discussed options such as further asset purchases, lengthening the maturity of the central bank's bond holdings and a cut in the interest it pays on bank reserves.
"I think the market is already expecting the Fed to buy longer-dated bonds at least. I'm not sure about cuts in interest rates as some say that could destabilise money markets," said a trader at a Japanese bank, referring to the idea of buying long-term bonds while selling short-term notes.
"But in any case, it is beyond doubt that they will do something. The market is likely to rally at least in the run-up to the Fed meeting. I wouldn't be surprised at all to see the 10-year yield falling to two percent," the trader said.
Copyright Reuters, 2011