Treasuries Pull Back Sharply In Reaction To Fed Minutes

(RTTNews) - After recovering from an early move to the downside, treasuries pulled back sharply following the release of the minutes of the latest Federal Reserve meeting on Wednesday.

Bond prices climbed well off their lows for the session going into the close but still ended the day in the red. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 4.1 basis points to 2.855 percent.

The pullback seen in afternoon trading came as traders digested the minutes of the Federal Open Market Committee meeting held in late July.

The minutes said almost all meeting participants were broadly comfortable with the outlook for the Fed's asset purchase program that was presented in Fed Chairman Ben Bernanke's post-meeting press conference in June.

That outlook called for the FOMC to begin scaling back the pace of its purchases later this year if economic conditions improved broadly as expected, with the program set to be concluded around the middle of 2014.

The minutes seemed to confirm expectations that the Fed will begin tapering is asset purchase program at its next meeting in mid-September.

At the same time, a few committee members emphasized the importance of being patient and evaluating additional information on the economy before deciding on any changes to the pace of asset purchases.

Paul Ashworth, Chief U.S. Economist at Capital Economics, said. "While it's far from a certainty, the minutes from the FOMC meeting back in late July appear to support our view that the Fed will begin to slow its monthly asset purchases at the next meeting in mid-September."

"An unexpectedly weak set of August employment figures could delay the taper but, with initial jobless claims trending even lower, we don't anticipate a report that would be bad enough to do that," he added.

The minutes of the Fed meeting largely overshadowed a report from the National Association of Realtors showing that existing home sales jumped to a three-year high in the month of July.

NAR said existing home sales jumped 6.5 percent to a seasonally adjusted annual rate of 5.39 million in July from a downwardly revised 5.06 million in June. Economists had expected existing home sales to climb to an annual rate of 5.15 million.

Trading on Thursday may continue to be impacted by reaction to the Fed minutes, although traders are also likely to keep an eye on reports on weekly jobless claims and leading economic indicators.