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US Treasury yields extend gains amid Fed minutes

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Yield
 
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%Change
US 3-MO
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US 1-YR
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US 2-YR
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US 5-YR
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US 10-YR
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US 30-YR
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U.S. sovereign bond prices were lower on Wednesday after a number of U.S. Federal Reserve officials raised the prospect of further interest rate hikes this year and as investors digested the latest Fed minutes.

The yield (which has an inverse relationship to the price) on the benchmark 10-year Treasury note sat higher, at 1.8643 percent, after hitting its highest level in two weeks, while the yield on the 30-year Treasury bond was also higher, at 2.6715 percent.

The two-year yield continued its surge, hitting its highest level since March 16, and was last trading at 0.9040 percent.

Lower rates and a dovish Fed have helped Treasurys to rally in recent years and any reversal of that stance is likely to be detrimental to the price of fixed income assets. Yields ticked higher Wednesday as investors shunned the asset class.

In the minutes, the Fed said it will likely raise interest rates in June if economic data points to stronger second-quarter growth as well as firming inflation and employment.

That view, expressed by most Fed policymakers at the last policy meeting, suggests the central bank is much closer to lifting rates again than Wall Street expects.

Prices for futures contracts on the Fed's benchmark overnight lending rate on Wednesday implied that investors only saw a 19 percent chance of a rate increase next month.

But members of the Fed's policy-setting committee said recent economic data made them more confident inflation was rising toward their 2 percent target and that they were less concerned about a global economic slowdown, according to the minutes from the April 26-27 meeting.

"Most participants judged that if incoming data were consistent with economic growth picking up in the second quarter, labor markets continued to strengthen, and inflation making progress toward the committee's 2 percent objective, then it likely would be appropriate for the committee to increase the target range for the federal funds rate in June," according to the minutes

On Tuesday afternoon, Atlanta Fed President Dennis Lockhart and San Francisco Fed President John Williams were quoted as saying the Fed's June meeting is "live," meaning the Fed could raise rates during the month. The market's expectations are that the Fed will not raise rates until the very end of this year or beginning of next year.

—CNBC's Patti Domm and Reuters contributed to this article.