- The Federal Open Market Committee left rates unchanged after its two-day monetary policy meeting on Wednesday.
The yield on the 10-year Treasury note rose as high as 2.75 percent on Wednesday after the Federal Reserve said inflation would move higher this year. The central bank left its benchmark rate unchanged.
Yields pulled back later in the day as many traders were expecting the Fed's upgraded assessment of inflation and the economy. The yield on the 30-year Treasury bond fell to 2.945 percent, while the 10-year yield fell to 2.72 percent. Bond yields move inversely to prices.
The Fed did not make any changes to its policy stance, though the central bank indicated that it anticipates inflation to heat up as the year progresses. According to December estimates, officials expect three rate hikes this year so long as there is no significant disruption to market conditions
"Inflation on a 12-month basis is expected to move up this year and to stabilize around the Committee's 2 percent objective over the medium term," the statement said. "Near-term risks to the economic outlook appear roughly balanced, but the Committee is monitoring inflation developments closely."
The FOMC meeting also marked the last time Janet Yellen acted as chair of the central bank; Jerome Powell will take the reins thereafter.
"I think 2.65 percent was really significant. That was a fairly important level," said Robert Sluymer, technical strategist at Fundstrat Global Advisors. "The 30 year has backed away from the highs of yesterday and the 10-30 curve is still flattening. I don't think rates are going meaningfully higher from here."
"I think the Fed said things are continuing broadly in line with their expectations. The real side of the economy looks strong: growth is solid, unemployment has stayed low, it's a good outlook" Nathan Sheets, chief economist at PGIM Fixed Income, told CNBC.
The economist added that the FOMC said market-based measures of inflation compensation have increased in recent months, though remain below the bank's 2 percent target.
Looking to the auctions space, the Treasury Department announced that it will auction off $26 billion in 3-year notes on Feb. 6, $24 billion in 10-year notes on Feb. 7 and $16 billion in 30-year bonds on Feb. 8.
The government's bigger debt requirement stems largely from recently-approved tax cuts. While usually a little-watched event, the refinancing announcement gave investors a sense of just how much more debt they can expect.
Rising interest rates were to blame for a 2.6 percent pullback in weekly mortgage applications, according to the Mortgage Bankers Association. Since home refinancing is sensitive to the slightest changes in lending rates, even a modest move in yields can have a pronounced effect on the number of borrowers.
Private payrolls data, however, surprised Wall Street to the upside Tuesday morning. Private companies hired another 234,000 in January, far exceeding projections of 185,000. The service-related industry posted the most hires, but manufacturing and construction industry also posted gains.
The more closely-followed report on the employment situation will be released by the U.S. Labor Department on Friday.
Bond prices found brief relief early Wednesday morning after the Bank of Japan bumped up the amount of national debt it was willing to purchase for the first time in months.
The Japanese central bank boosted the amount it purchased in government debt with three to five years left to maturity to 330 billion yen, up from 300 billion yen.
On the political front, President Donald Trump delivered his State of the Union address Tuesday night. The overall theme of the incumbent's speech was "a safe, strong and proud America," with Trump touching upon topics such as immigration, bipartisan cooperation, infrastructure and the economy.
—CNBC's Jeff Cox contributed to this report.