Treasury prices and yields were left mixed Wednesday after minutes from the Federal Reserve’s January meeting showed officials divided over future rate hikes but in favor of bringing the unwind of the central bank’s balance sheet to an end later this year.
What are yields doing?
The yield on 10-year Treasury note TMUBMUSD10Y, +0.34% rose 0.3 basis point to 2.648%, while the 2-year yield TMUBMUSD02Y, +0.16% was marginally lower at 2.495%. The 30-year Treasury bond yield TMUBMUSD30Y, +0.50% was up 1.1 basis points to 3%.
What’s driving the market?
Treasury yields were lifted but failed to take out session highs after the release of the minutes from the January meeting, which showed one camp of officials arguing that rate increases might be needed only if inflation came in higher than their baseline forecast. Others thought it would be appropriate to raise rates later in 2019 if the economy evolved as expected.
Read: Fed divided over need for further interest-rate hikes, minutes show
There was, however, no camp leaning toward rate cuts. Also, the minutes showed “almost all” participants want to halt the rundown of the Fed’s balance sheet later this year.
Trade talks between the U.S. and China are also in focus. Negotiators resumed discussions in Washington on Tuesday, with discussions set to continue this week following a round of talks in Beijing last week. U.S. President Donald Trump on Tuesday said there was nothing “magical” about an early March deadline that would see tariffs on imports of Chinese goods jump to 25% from 10%,.
The remarks were taken as a signal that tariffs might not jump if a deal isn’t completed by that date.
Read: Global stock market faces ‘catastrophic strike’ if trade war escalates: China newspaper
What are analysts saying?
“Price action in response has been modestly bearish for [U.S. Treasurys], and pushed the curve flatter as equities declined slightly — certainly the market is interpreting this as marginally hawkish as the possibility of additional hikes remains in place,” said Jon Hill, analyst at BMO Capital Markets, in a note.