US Treasuries prices sank on Wednesday after minutes from the Federal Reserve's March policy meeting fuelled fears the US central bank might slow or stop buying bonds by year-end. The minutes of the central bank's meeting, released earlier than originally scheduled, showed that a few policymakers expected to slow the pace of asset purchases, currently at $85 billion a month, by mid-year and end them later this year.
Several others expected to slow the pace a bit later and halt the quantitative easing program by year-end. Stronger-than-expected Chinese import data and record highs in US stock indices also reduced the safe-haven appeal of Treasuries, sending longer-dated yields back to last Thursday's levels. The market sell-off picked up speed after the Treasury sold $21 billion worth of 10-year notes at a high yield of 1.795 percent, slightly higher than the market expected.
But some analysts said the reaction to the Fed minutes was overdone as jobs data since the March 19-20 meeting, including key March payrolls data released last Friday, have disappointed, stoking expectations for slower growth and continued Fed support. "The payroll jobs report was the final nail in the coffin of an early halt to QE (quantitative easing) for now," said Chris Rupkey, chief financial economist at Bank of Tokyo/Mitsubishi UFJ in New York.
Benchmark 10-year Treasuries notes last traded 16/32 lower in price, yielding 1.807 percent compared with 1.752 percent late on Tuesday. The 10-year yield moved further above its 200-day moving average and the level before the release of the March payroll report that showed a paltry gain of 88,000 jobs. The 30-year bond was down 1-12/32 in price for a yield of 3.005 percent, up from 2.938 percent late on Tuesday.
Declines were limited by bets Japanese investors will pour money into US Treasuries due to the Bank of Japan's bold $1.4 trillion asset purchase program to stimulate the economy. BoJ Governor Haruhiko Kuroda said there would be no additional stimulus in the coming months but signalled the central bank was open to doing more to achieve faster growth.
The BoJ program was the initial catalyst for last week's Treasuries rally as traders bet Japanese banks, insurers and pension banks will increase their purchases of Treasuries and other higher-yielding foreign bonds. But so far, there has been no surge in inflows of Japanese money into the Treasuries market, including in Wednesday's auction of 10-year notes.