U.S. government debt yields fell from multiyear highs reached on Wednesday after the Federal Reserve's latest minutes showed that the central bankers expect greater economic growth and inflation.
As of the latest reading, the yield on the benchmark 10-year Treasury note was slightly lower at 2.921 percent at 4:06 p.m. ET, down from a four-year high of 2.95 percent topped Wednesday. The yield on the benchmark 2-year Treasury note hovered just under a nine-year high at 2.254 percent.
Investor anxiety resurfaced Wednesday, after minutes from the Federal Reserve's latest meeting revealed that members were comfortable hiking rates multiple times throughout 2018. Adding to the pressure on debt, the Federal Open Market Committee's meeting occurred prior to two major inflation indicators: wage growth in the January jobs report and an uptick in the CPI.
The central banking news consequently put markets on edge, with U.S. government debt yields rising sharply following the document's release, and Wall Street reversing gains, to finish the session down in the red.
"Markets were steady immediately following the release, although the market bear steepened shortly thereafter," said Arthur Bass, managing director of fixed-income financing, futures, and rates at Wedbush Securities. "I think that a good part of the move may have been unwinds. The flattening yield curve has been one of the largest trends in the past year, and the steepening curve following the minutes release implied an unwinding of some positions, although yields rose in every maturity."
Traders widely expect the central bank to approve a quarter-point increase at its March meeting, moving up the Fed's target range to 1.5 percent to 1.75 percent; the CME Group's FedWatch tool see the likelihood of a March hike at 83 percent.
The Fed said it still saw inflation reaching its 2 percent objective and that it didn't look like it was getting out of control. The news surrounding higher interest rates continued to weigh on markets Thursday, but this won't be the only piece of news set to shake up markets.
The Treasury Department auctioned $29 billion in seven-year notes at a high yield of 2.839 percent. The bid-to-cover ratio, an indicator of demand, was 2.49. Indirect bidders, which include major central banks, were awarded 62.2 percent. Direct bidders, which includes domestic money managers, bought 15.6 percent.
As debt yields pull back from their earlier gains, investors will be turning their attention to speeches by the U.S. Federal Reserve, and economic data.