Bond yields give up post-Fed gains as 10-year yield hovers around 1.50%

The key 10-year Treasury yield dipped Thursday as investors digested the Federal Reserve's policy update and a big sell-off in commodities.

The yield on the benchmark 10-year Treasury note fell 5.3 basis points to 1.516% at 4:00 p.m. ET. The yield on the 30-year Treasury bond dropped 9.6 basis points to 2.113%. Yields move inversely to prices. One basis point is 0.01%.

Yields gave up the gains that came after the Fed raised inflation expectations and signaled that interest rate hikes would come sooner than expected on Wednesday afternoon.

Bond traders were eying a significant sell-off in commodities. Prices for metals like copper continued their weekly decline amid actions by China to crackdown on inflation. Bond yields will often move in tandem with commodities because they are considered a barometer for global economic growth.

Initial jobless claims came in at 412,000 last week on Thursday, higher than the 360,000 expected, possibly aiding the flight back into bonds that sent yields lower.

On Wednesday, the Fed raised its headline inflation expectation to 3.4%, a full percentage point higher than the March projection, after its two-day policy meeting concluded on Wednesday afternoon. However, the post-meeting statement reiterated the Fed's view that inflationary pressures were "transitory."

The Fed also indicated that rate hikes could come as soon as 2023, after saying in March that it saw no increases until at least 2024. The so-called dot plot of individual member expectations pointed to two hikes in 2023.

Nevertheless, Fed Chairman Jerome Powell said in a press conference following the meeting that the central bank's forecast needed to be taken with a "big pinch of salt."

But, Powell did not issue guidance on when the central bank will begin tapering its bond-buying program.

Yields rose on Wednesday after the central bank's announcements, but the benchmark 10-year still traded well below its recent highs.

Zachary Griffiths, senior macro strategist at Wells Fargo Securities, told CNBC's "Squawk Box Europe" on Thursday that while Treasury yields were still much lower than earlier in the year, his firm believed yields would continue to rise going forward.

He said this would both be driven by the global economic reopening in the recovery from the pandemic and a Fed that is starting to think about tapering asset purchases "at some point down the road."

By downplaying certain central bank members' forecasts, Griffiths said Powell looked to be taking "off the gas of the accommodation" peddle and it seemed that he was doing "everything he can to make that as gradual a process as possible."

Auctions are scheduled to be held Thursday for $40 billion of 4-week bills, $40 billion of 8-week bills and $16 billion of 5-year Treasury inflation-protected securities.

CNBC's Jeff Cox contributed to this market report.