- Federal Reserve officials see increased economic growth and creeping inflation, as revealed in the Federal Open Markets Committee's latest minutes.
- The yield on the two-year Treasury note hit 2.282 percent Tuesday evening, its highest level since Sept. 19, 2008.
- The yield on the 10-year Treasury note hit a high of 2.950 percent, its highest level since Jan. 10, 2014.
- Macquarie Group's Thierry Wizman said that he anticipates a renewed hawkishness from the FOMC in the coming months, especially in light of strong wage and CPI numbers.
U.S. government debt yields jumped Wednesday after the Federal Reserve released minutes from its January meeting.
The yield on the benchmark 10-year Treasury note hit a four-year high of 2.95 percent, before trading at 2.943 percent at 4:04 p.m. ET.
The two-year yield hit 2.282 percent Tuesday evening, its highest level since Sept. 19, 2008, when it yielded as much as 2.313 percent before falling later in the morning. Bond yields move inversely to prices.
Fed officials expect increased economic growth and creeping inflation, as revealed in the Federal Open Markets Committee's latest minutes. Officials concluded that "upside risks" to economic growth had increased thanks to tax cuts, increased consumer spending and confidence.
"A majority of participants noted that a stronger outlook for economic growth raised the likelihood that further gradual policy firming would be appropriate," the summary stated.
Thierry Wizman, global interest rates and currencies strategist at Macquarie Group, said that he anticipates a renewed hawkishness from the FOMC in the coming months, especially in light of strong wage and CPI numbers.
"We expect more radical changes in the FOMC's rhetoric in forthcoming speeches and communications," Wizman said. "Recognizing that the Minutes are 'stale' in view of more inflationary recent data and the transition in leadership from Janet Yellen to Jerome Powell, markets took the opportunity to whack U.S. Treasuries."
FOMC members said they have increased economic projections they made at the previous meeting in December.
"We're getting into a big focal point for the bond market here as it faces increased supply, decreased central bank buying and an economy in the ninth year of an expansion," Gary Pollack, head of fixed-income trading at Deutsche Bank Private Wealth Management said. "Rates have risen and they've risen quite quickly. I don't think anybody thought we'd be at 2.9 [percent] this far into 2018."
Pollack added that a 3 percent yield on the 10-year note isn't a matter of if, but when.
The Treasury Department auctioned $35 billion in five-year notes at a high yield of 2.658 percent. The bid-to-cover ratio, an indicator of demand, was 2.44. Indirect bidders, which include major central banks, were awarded 58 percent. Direct bidders, which includes domestic money managers, bought 12.7 percent.
The Fed "talked about paying more attention to asset prices and even though we've had a correction lately, asset growth has been high ... That's something I regard as hawkish," said David Kelly, chief global strategist at J.P. Morgan Funds. "The other thing and more important thing is that these minutes were from three weeks ago. Since then we've had a higher than expected wage number and higher than expected CPI number."
"These notes were a little bit on the hawkish side, but if anything, the Fed may be even more inclined to hike now."
Investors in the bond space also looked for news in the data space.
Mortgage interest rates jumped again for the week ending Feb. 16, sending application volume tumbling 6.6 percent on an adjusted basis from the previous week. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances increased to its highest level since January 2014, according to the Mortgage Bankers Association.
Existing home sales slumped for a second straight month in January, fettered by a shortage of houses that has prices climbing and keeping new buyers away.
The National Association of Realtors said on Wednesday that existing home sales dropped 3.2 percent to a seasonally adjusted annual rate of 5.38 million units last month.
— CNBC's Jeff Cox contributed to this report.