Bond yields shed gains after Fed

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U.S. sovereign bond prices remained lower Wednesday afternoon, but showed slight gains after the Federal Reserve opted not to hike interest rates at its January meeting and gave no indication that it was changing course on its rate-hiking path ahead.

The 10-year Treasury yield was just above 2 percent after the news, while the 30-year yield was at 2.796 percent. The 2-year and 5-year note yields both edged in and out of the red after the news.

"Short term rates are going to stay low," Bill Gross, lead portfolio manager at Janus Global Unconstrained Bond Fund, told CNBC. "The fact is they're low already and that 2-year Treasury is, not historically low, but certainly significantly low."

At 1:55 p.m., just before the Fed news, the U.S. 10-year Treasury yield, which moves inversely to the bond's price, climbed to 2.041 percent. The longer-dated 30-year yield was also higher at 2.819 percent.

The Fed and the markets have been at odds over the central bank's interest rate forecasts. When it raised rates for the first time in nine years in December, the forecasts of Fed officials pointed to four additional hikes for this year. As of now, the market is pricing in one and each piece of disappointing economic news has reinforced that view.


As concerns surrounding global growth, uncertainty in China and fresh lows in oil prices gripped markets, investors have rushed into safe-haven assets such as U.S. Treasurys, with government debt prices gaining when oil and stock prices fall.

Ahead of the Fed announcement new home sales figures for December were released. Sales increased 10.8 percent to a seasonally adjusted annual rate of 544,000 units, an indication that the housing sector remains on firmer footing.

And earlier Wednesday, Treasury Department auctioned $35 billion in 5-year notes at a high yield of 1.496 percent.

Will the Fed throw a yield curve?

The latest auction of 5-year notes was sold at the lowest yield since October, according to Reuters.

The bid-to-cover ratio, an indicator of demand, was 2.44.

Indirect bidders, which include major central banks, were awarded 53.5 percent, a bit lower than the recent 58 percent average. Direct bidders, including domestic money managers, bought 8.6 percent, slightly above the recent 7 percent average.

Crude oil futures surged Wednesday, when Brent crude saw a $1.33 gain to $33.13 a barrel after supplies reportedly built less than was initially feared. U.S. crude rose 89 cents to $32.34 a barrel, recovering from a session low of $30.30 a barrel.

— CNBC's Jeff Cox and Reuters contributed to this report.