FX.co ★ Treasuries Move Modestly Lower Following Fed Minutes

After an initial bout of weakness, Treasury bonds made a moderate move downward in Wednesday afternoon trading.

Bond prices initially rebounded near their previous levels but subsequently declined. This resulted in the yield on the benchmark ten-year note, which inversely correlates with its price, rising by 2.0 basis points to 4.434%.

This modest retreat in treasuries followed the release of the minutes from the latest Federal Reserve meeting, indicating that officials anticipate maintaining interest rates at their current levels for a longer period than previously expected.

The minutes from the April 30-May 1 meeting highlighted disappointing inflation data from the first quarter, alongside indicators of strong economic momentum.

Participants of the meeting assessed that it would take longer than previously anticipated to gain "greater confidence" that inflation is sustainably moving towards the 2 percent target.

With Federal Reserve officials consistently stating the need for "greater confidence" in a slowdown in inflation before considering rate cuts, the minutes revealed that participants discussed maintaining the current restrictive policy stance for an extended period.

While officials also discussed potentially easing policy in the event of an unexpected decline in labor market conditions, some participants expressed a willingness to raise rates further should inflationary risks necessitate such action.

"The investing world will have to wait at least another month to hear anything about rate cuts, but the surprising element in this report was the willingness of some participants to potentially increase policy restrictions," said Alex McGrath, Chief Investment Officer for NorthEnd Private Wealth.

Looking ahead, trading on Thursday may be influenced by reactions to reports on weekly jobless claims and new home sales.