Medium- and longer-dated U.S. Treasurys yields rose on Wednesday after minutes from the Federal Reserve's latest policy meeting suggested the central bank would be slow in raising interest rates.
Minutes from the Fed's April policy meeting said the central bank's staff presented several approaches to raising short-term interest rates, but said the discussion was simply "prudent planning" and not a sign rate hikes would come any time soon.
Traders viewed certain comments as more dovish, including that the housing sector could face a persistent slowdown and that some meeting participants said it was too early to confirm the economy was moving toward sustained above-trend growth.
"The Fed's going to stay behind the curve" in raising rates, said Chris McReynolds, head of U.S. Treasury Trading at Barclays in New York, after the release of the minutes.
Anticipation that the Fed minutes would be dovish led traders to sell 30-year Treasury bonds and favor two- and five-year Treasury notes before the release of the minutes, since a slower hike in interest rates would protect shorter-dated notes from price losses.
Shorter-term Treasury notes, which are more vulnerable to a hike in interest rates, had also become more insulated since New York Federal Reserve President William Dudley said Tuesday that the central bank would likely be "relatively slow" in hiking rates, traders said. "Dudley's comments were a perfect preface for what we saw in the minutes today," said Millan Mulraine, deputy chief U.S. economist at TD Securities in New York.
Much of the price weakness in the long end of the Treasurys market had taken place in the runup to the minutes. Traders said that profit-taking after last week's rally in 10-year notes and 30-year bonds had also weakened prices on those securities.
Remaining short bets against Treasurys also kept prices weak and prevented 30-year bond yields from nearing last week's low of 3.3 percent and 10-year notes from nearing a low of 2.473 percent, traders said.
Benchmark 10-year Treasury notes were last down 7/32 in price to yield 2.537 percent, from 2.509 percent late Tuesday. Prices on 30-year Treasury bonds were last down 20/32 to yield 3.417 percent, from 3.375 percent late Tuesday.
Prices on traded flat at 0.343 percent.
Prices on shorter-dated notes were mostly flat, meanwhile, showing traders' preference for the notes compared to longer-dated bonds. Prices on two-year Treasury notes traded flat to yield 0.34 percent, from 0.33 percent late Tuesday.
Traders also said that strength in U.S. stocks limited safe-haven bids for Treasuries. U.S. stocks held gains after the release of the minutes, erasing the previous day's broad selloff. The S&P 500 last ended up 0.81 percent.