Bonds extended earlier losses on Wednesday after the Federal Reserve ended its monthly bond purchase program and signaled confidence the U.S. economic recovery would remain on track despite signs of a slowdown in many parts of the global economy.
Benchmark 10-year Treasury notes—whose yields are used to calculate mortgage rates and other consumer loans—fell 17/32 in price to yield 2.36 percent, up from 2.27 percent earlier in the session.
Meanwhile, five-year notes were down 14/32 in price and yielding 1.61 percent after the Fed announcement.
``The Fed's announcement is exactly what everyone expected. The Fed sees enough improvement in economic activity to end QE, but at the same time, it will keep low rates because it isn't yet seeing what it wants to see as far as inflation goes. That's what everyone expected. Policy is still very accommodative," said Wayne Kaufman of Phoenix Financial.
Bonds edged lower earlier after the U.S. government's auction of five-year Treasury notes, the second of three debt auctions this week.
The Treasury Department auctioned $35 billion in five-year bonds at a high yield of 1.567 percent, the lowest yield since May.
The bid-to-cover ratio, an indicator of demand, was the weakest since July 2009 at 2.36, versus a recent average of 2.74.
Benchmark 10-year Treasury notes—whose yields are used to calculate mortgage rates and other consumer loans—fell 8/32 in price to yield 2.32 percent.