US Treasury debt prices fell on Wednesday for a fourth straight session after minutes of Federal Reserve's September meeting showed that most policy-makers remained "quite concerned" about inflation.
The latest Fed minutes reinforced the perception since last Friday's nonfarm payroll data that the central bank was in no hurry to lower interest rates and left the door open for more rate increases if warranted.
"The market weakened because the headlines on the September FOMC meeting minutes were more bearish than people expected," said Chris Rupkey, senior financial economist at the Bank of Tokyo/Mitsubishi in New York.
The day's sell-off was mitigated by news of a small plane crashing into a New York City building, which prompted fears of a possible terror attack and lifted bond prices from their session lows from a flurry of safe-haven bids.
Police officials said the aircraft crash, which killed two people, did not appear to be linked to terrorism.
"It appears to be an accident, however tragic, rather than an attack, so that has calmed the market," said Bernd Wuebben, senior bond market strategist at BNP Paribas in New York.
Yields on benchmark 10-year Treasury notes, which move in the opposite direction of prices, rose to fresh three-week highs after the Fed minutes. Ten-year notes were down 6/32 in price for a yield of 4.78 percent, up from 4.76 percent late Tuesday, and the 30-year bond fell 11/32 in price for a yield of 4.91 percent, compared to 4.89 percent late on Tuesday.
The Fed said recent rates of core inflation, if they persisted, were higher than consistent with price stability, according to the record of the policy-making Federal Open Market Committee meeting.
The core price index on personal consumption expenditure, the Fed's preferred inflation gauge, was running at 2.5 percent higher in August than a year ago. The core PCE reading was the highest since April 1995 and well above the perceived 1.0 percent to 2.0 percent comfort zone among Fed officials.
The US central bank also forecast that US economic growth would be near potential in 2007 and 2008, stronger than what Wall Street has forecast.
Two-year notes, most sensitive to changes in Fed rate policy, were down 1/32 in price for a yield of 4.86 percent versus 4.83 percent on Tuesday.