US Treasury prices were little changed on Wednesday after minutes from the Federal Reserve's September meeting were in line with expectations and after the Treasury Department saw solid demand for three-year and 10-year note supply. Fed policymakers had a prolonged debate about the prospects of a pickup in inflation and the path of future interest rate rises if it did not.
"There's really nothing that stood out. The market reaction has been relatively muted," said Subadra Rajappa, head of US rates strategy at Societe Generale in New York. "We go back to focusing on inflation, that's really where we need more clarity to get a sense of where things are headed for the rest of the year," Rajappa said.
Benchmark 10-year notes were last up 2/32 in price to yield 2.339 percent, down from 2.345 percent on Tuesday. The 10-year yields jumped to 2.402 percent on Friday, the highest level since May 11, after the government's employment report for September showed a rise in wages that boosted expectations inflation is increasing.
Consumer price data on Friday will be scrutinized for confirmation of higher prices, though many analysts have said that data is muddied by recent hurricanes. Adverse weather is seen as having impeded lower-income workers from getting to work more than it did higher-income workers. The Fed minutes maintained expectations that the US central bank is likely to raise rates again at its December meeting.
Its policy statement last month was seen as hawkish, and that view gained further credence in the wake of strong US economic data and Fed officials' comments. "Speakers have been out in force recently, and I think they've been pretty clear that a December rate hike is certainly on the table," said Thomas Simons, a money market economist at Jefferies in New York. The Treasury saw solid demand for $24 billion in three-year notes and $20 billion in 10-year notes on Wednesday, part of $56 billion in new coupon-bearing supply this week. The government will also sell $12 billion in 30-year bonds on Thursday.
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