Treasuries Fall Sharply Following Release Of Fed Minutes

(RTTNews) - After moving notably lower early in the session, treasuries saw some further downside following the release of the minutes of the latest Federal Reserve meeting.

Bond prices fell sharply going into the close, ending the day firmly in negative territory. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, jumped by 12.1 basis points to 1.880 percent.

With the substantial increase on the day, the ten-year yield ended the session at its highest closing level in almost a month.

The sell-off by treasuries came as the minutes of the Fed's April monetary policy meeting hinted strongly at the possibility of an interest rate hike next month.

Most participants determined it would likely be appropriate to raise rates in June if incoming data is consistent with economic growth picking up in the second quarter, labor market conditions continuing to strengthen, and inflation making progress toward the 2 percent objective.

The Fed noted that a few participants judged it appropriate to hike rates at the April meeting due to their assessment that downside risks associated with global economic and financial developments had diminished substantially.

However, most participants wanted to keep rates unchanged but leave open the possibility of an increase in the federal funds rate at the June meeting.

The minutes reinforced the concerns about a rate hike stirred up by yesterday's upbeat housing and industrial production data as well as a report showing a bigger than expected increase in consumer prices.

Chris Low, chief economist at FTN Financial, said, "We continue to expect the Fed will NOT raise rates in June. But the minutes indicate there will be a lively discussion and the decision will be a close call, as apparently it was in April."

"It almost goes without saying, but in this context the next few employment, retail sales and consumption reports take on added significance," he added.

Trading on Thursday may continue to be impacted by reaction to the Fed minutes, although reports on weekly jobless claims and Philadelphia-area manufacturing activity are also likely to attract attention.