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Bond yields lower after the Federal Reserve keeps rates unchanged

U.S. government debt prices were higher on Wednesday, as investors digested important news out of the Federal Open Market Committee's (FOMC) latest meeting.

The yield on the benchmark 10-year Treasury note slipped to 2.289 percent, while the yield on the 30-year Treasury bond was down at 2.894 percent. Bond yields move inversely to prices.

The yield on the 2-year Treasury note slipped to a now session low of 1.355 percent.

U.S. Markets Overview: Treasurys chart

The Federal Reserve announced that it will not raise interest rates Wednesday afternoon. The decision not to hike rates came as no surprise, as investors do not expect that the central bank will raise rates until the end of the year.

The Federal Open Market Committee's statement containing key language that points to starting rolling back the Fed's balance sheet in September.

"The committee expects to begin implementing its balance sheet normalization program relatively soon, provided that the economy evolves broadly as anticipated," the post-meeting statement said.

The central bank hopes to begin shrinking its $4.5 trillion portfolio of bonds it has accrued on its balance sheet, largely collected during and after the financial crisis and the Great Recession it generated.

"They look like they're trying to thread the needle between sounding firm and not giving too much away. In that way they were successful," said Aaron Kohli, fixed income strategist at BMO. "That's provided some solace to rates. The fact they were willing to say they would go relatively soon (on balance sheet reduction) ... It's a fair statement and it's pretty balanced."

On the auction front, the Treasury Department auctioned $34 billion in 5-year notes at a high yield of 1.884 percent. The bid-to-cover ratio, an indicator of demand, was 2.58.

Indirect bidders, which include major central banks, were awarded 69.8 percent. Direct bidders, which includes domestic money managers, bought 6.2 percent.

Also, economists polled by Reuters expected new home sales to hit 620,000 units in June, versus a reading of 610,000 in the prior month.

Looking to politics, a plan to repeal and replace Obamacare failed to acquire the 60 votes it needed to be approved, with only 43 voting in favor, according to Reuters. 57 voted against the measure on Tuesday night.

On the oil front, prices traded higher, on expectations of a drawdown in U.S. stocks while an uptick in shale oil production showed signs of decelerating.

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CNBC's Gina Francolla contributed to this report.