Bond Losses Ease Following Fed Decision

The price of two-year U.S. Treasury notes turned flat Wednesday, erasing initial losses after the Federal Reserve, as expected, left interest rates unchanged but warned of elevated risks of inflation.

Bond prices bounced back from session lows when traders concluded the Fed policy-makers will keep interest rates steady at their August policy meeting despite their heightened anti-inflation language, analysts said.

The price of two-year government debt, which fluctuates with the market's view on Fed policy, was unchanged from Tuesday at 100-2/32.

The yield was 2.85 percent after reaching a session high of 3.01 percent in the immediate aftermath of the Fed policy statement. It compared with the high yield of 2.92 percent on the new two-year notes auctioned Tuesday.

Benchmark 10-year Treasury notes were trading 4/32 lower in price for a yield of 4.12 percent, down from the 4.16 percent shortly after the Fed statement. The yield ended at 4.10 percent Tuesday.