10-year yield holds higher after Fed minutes are released

Rates on long-dated U.S. sovereign bonds were higher on Wednesday as investors digested a summary of the Federal Reserve's meeting last month. Investors also sold bonds in favor of stocks amid growing optimism around U.S.-China trade talks.

The 10-year Treasury yield rose 4 basis points to 1.57% while the 30-year bond yield climbed 4 basis point to 2.07%. Yields move inversely to prices. 

The minutes from the Fed's September meeting showed some officials are worried the market may be overly optimistic about the number of rate cuts moving forward. They also said trade remains a concern to Fed officials.

Still, the Fed is largely expected to cut rates for a third time later this month. Another 25 basis-point rate cut would bring the overnight rate to a range of 1.5% to 1.75%.

The minutes were released after Fed Chairman Jerome Powell said Tuesday that policymakers at the U.S. central bank would be open to further interest rate cuts over the coming months. He also suggested that the time to allow the Fed's asset holdings to begin to expand was "now upon us."

"What really driving markets is the outlook for Fed policy," said Erik Bregar, head of FX strategy at the Exchange Bank of Canada. With his comments Tuesday, Powell "basically admitted to another round of quantitative easing but is telling everybody 'that's not what it's called.'"

"But no matter which way you look at it, the Fed is intervening. These are emergency type measure," Bregar said. "What we're seeing right now is a Fed in flat-out denial."

Investors are also focused on U.S.-China trade relations as both countries are set to hold high-level negotiations Thursday and Friday.

The long-running dispute has slowly expanded beyond trade policy, exacerbating fears about further damage to a fragile global economy. President Donald Trump has said tariffs on Chinese imports will increase on Oct. if no progress is made in bilateral trade negotiations.

However, optimism around the talks rose Wednesday after a Bloomberg News report said China remained open to a partial trade deal. Expectations of even a partial agreement between the two countries dimmed on Tuesday after the U.S. blacklisted several Chinese companies.