Treasuries saw substantial volatility over the course of the trading session on Wednesday before eventually closing firmly positive.
After showing wild swings as the day progressed, bond prices moved to the upside going into the close. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 5.2 basis points to 3.706 percent.
The late-day advance by treasuries came following the release of the minutes of the Federal Reserve’s early November monetary policy meeting, which provided further evidence the central bank is considering slowing the pace of its interest rate hikes.
The minutes said a “substantial majority” of meeting participants judged that a slowing in the pace of rate hikes would likely “soon be appropriate.”
A slower pace of rate hikes would better allow the Fed to assess progress toward its goals of maximum employment and price stability, the minutes said.
However, a few other participates suggested it could be advantageous to wait until the rates were more clearly in restrictive territory and there were more concrete signs that inflation pressures were receding significantly before slowing the pace of rate hikes.
The minutes also said participants agreed further interest rate increases would be appropriate in order to attain a sufficiently restrictive stance to bring inflation down over time.
Various participants also indicated the ultimate level of the federal funds rate that would be necessary to achieve the Fed’s goals was somewhat higher than they had previously expected.
“The minutes of the Fed’s early-November policy meeting suggest that although most officials were in favor of slowing the pace of rate hikes at upcoming meetings, there was no consensus on how high the peak in rates would ultimately need to be, or how long to leave policy in that restrictive stance,” said Paul Ashworth, Chief North America Economist at Capital Economics.
The central bank’s next monetary policy meeting is scheduled for December 13-14, with CME Group’s FedWatch Tool currently indicating a 75.8 percent chance of a 50 basis point rate hike and a 24.2 percent chance of another 75 basis point rate hike.
The volatility seen for much of the day came as traders awaited the Fed minutes while digesting a mixed batch of U.S. economic data.
While separate Commerce Department reports showed notable increases in durable goods orders and new home sales in October, the Labor Department said initial jobless claims reached a three-month high in the week ended November 19th.
Following the Thanksgiving Day holiday on Thursday, trading activity is likely to be subdued on Friday ahead of an early close.