Following the notable weakness seen in the previous session, stocks saw some further downside during trading on Wednesday.
Bond prices came under pressure in early trading and remained stuck in the red throughout the session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, climbed 6.2 basis points to 2.035 percent.
With the increase on the day, the ten-year yield added to the 4.9 basis point gain posted on Tuesday to reach its highest closing level in well over a month.
The weakness among treasuries came as traders kept a close eye on the Federal Reserve’s highly anticipated monetary policy announcement.
The Fed left interest rates unchanged as was widely expected and acknowledged that economic growth slowed during the winter months.
However, the Fed said the slower economic growth partly reflected transitory factors, likely referring to the impact of the severe weather and a labor dispute at West Coast ports.
While the central bank did not provide any specific guidance about the outlook for interest rates, analysts noted that the statement did not rule out a rate hike in June.
The Fed’s unwillingness to speculate about the outcome of the June meeting likely reflects uncertainty about whether the economy will rebound from the weak growth seen in the first quarter.
Rob Carnell, chief international economist at ING, said, “For the Fed to rule out a June hike now, though it looks unlikely at this stage, would have left them hostages to the run of data between now and then.”
“Indeed, it is entirely possible that this data will run consistently stronger than it has been doing in recent weeks, though whether it will be strong enough for the Fed to actually hike in June still seems quite a push,” he added.
Earlier in the day, the Commerce Department released a report showing that the U.S. economy grew by even less than anticipated in the first quarter of 2015.
The report said U.S. GDP inched up by just 0.2 percent in the first quarter following the 2.2 percent growth seen in the fourth quarter. Economists had expected an increase of about 1.0 percent.
With the focus on the Fed, traders largely shrugged off the results of the Treasury Department’s auction of $29 billion worth of seven-year notes, which attracted average demand.
The seven-year note auction drew a high yield of 1.820 percent and a bid-to-cover ratio of 2.44, while the ten previous seven-year note auctions had an average bid-to-cover ratio of 2.47.
The bid-to-cover ratio is a measure of demand that indicates the amount of bids for each dollar worth of securities being sold.
In light of the Fed’s focus on incoming economic data, trading on Thursday may be impacted by reaction to reports on weekly jobless claims, personal income and spending, and Chicago-area business activity.
The material has been provided by InstaForex Company – www.instaforex.com