US Treasury prices finish lower

US government bond prices shaved modest gains and turned lower on Wednesday after minutes from the Federal Reserve's March policy meeting asserted that more monetary tightening might be needed.
"The minutes showed they are still open to raising rates and that further rate increases may be necessary," said Kevin Flanagan, fixed income strategist for global wealth management with Morgan Stanley in Purchase, New York. "That may have been enough to throw a little bit of cold water on the bond market, but is not enough to alter expectations for the Fed."
Some buying occurred early in the session, with investors drawn by yields trading near two-month highs in the aftermath of a strong US jobs report last week. But government bonds' gains were capped as traders grew wary before an appearance by Fed Chairman Ben Bernanke, who spoke about hedge fund regulation. His remarks did not affect bond prices.
After the release of the Fed meeting minutes, however, the benchmark 10-year Treasury note lost ground. It was last down 4/32 in price for a yield of 4.74 percent, compared with 4.71 percent before the minutes were issued and with 4.72 percent late Tuesday. Bond yields and prices move inversely.
Since that March Fed meeting, bond prices have generally fallen but yields rose, with investors increasingly jittery that quickening inflation might prevent the Fed from cutting interest rates for the foreseeable future.
One recent indication of inflation pressures came in the US monthly jobs report last Friday, which showed average hourly earnings rose 4.0 percent year-on-year to March.
"Inflation is still the Fed's primary concern," said Andrew Richman, managing director of SunTrust's personal asset management division, based in West Palm Beach, Florida. Indeed, Richmond Fed Bank President Jeffrey Lacker said on Wednesday that the Fed might have to raise interest rates again if inflation does not moderate.
The two-year note, which responds closely to expectations for the central bank's interest-rate moves, was down 2/32 in price after the release of the Fed minutes, yielding 4.73 percent. Before the release, the two-year note was up 1/32 in price for a yield of 4.69 percent, versus 4.70 percent late Tuesday. The 30-year bond, up 3/32 in price just before the release of the minutes, was down 5/32 afterward, its 4.92 percent yield up from 4.91 percent late Tuesday.