Treasuries prices fell on Wednesday and 30-year bonds slumped after the Fed said it would shift more purchases to the five-year sector in a new easing program, with expectations the move would boost the economy and thus help riskier assets such as stocks.
The Federal Reserve committed to monthly purchases of $45 billion in Treasuries on top of the $40 billion per month in mortgage-backed bonds it started buying in September. It will expand purchases to five-year notes from the current seven-, 10- and 30-year Treasuries.
It also took the unprecedented step of saying it would keep interest rates near zero until the jobless rate falls to 6.5 percent, well below its current level, so long as inflation and inflation expectations were contained.
"They are basically taking out the same amount of duration that they were in Twist, but they are buying less in the long end than they had been before," said Ira Jersey,an interest rate strategist at Credit Suisse in New York.
Five-year notes fell 02/32 in price to yield 0.649 percent, from around 0.636 percent late on Tuesday. Benchmark 10-year notes dropped 13/32 to yield 1.699 percent. Thirty-year bonds dropped by more than a full point in price to yield 2.897 percent, up from 2.84 percent late on Tuesday.