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Treasuries Pull Back Sharply Following Fed Minutes

After seeing modest strength for much of the session, treasuries pulled back sharply late in the trading day on Tuesday following the release of the minutes of the latest Federal Reserve meeting.

Bond prices moved sharply lower going into the close, ending the session firmly in negative territory. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, jumped 9.1 basis points to 2.284 percent.

The steep drop by treasuries came on the heels of the release of the minutes of the last Federal Open Market Committee meeting in March.

Traders reacted negatively to the minutes, which seemed to indicate that the FOMC members were less willing to initiate another round of quantitative easing amid signs of improvement in the U.S. economy.

The latest minutes said only "a couple of members" indicated that additional stimulus could become necessary compared to the minutes of the January meeting, which said "a few members" believed that conditions could warrant additional securities purchases.

Paul Ashworth, Chief U.S. Economist at Capital Economics, said, "The spike in Treasury yields in the immediate aftermath of the release of the minutes suggests that a few people were still clinging to the possibility that a QE3 was coming, perhaps led on by the dovish tone of chairman Ben Bernanke's recent speech on the labor market."

Earlier in the day, the Commerce Department released a report showing that factory orders rebounded by slightly less than expected in the month of February.

The report showed that new orders for manufactured goods rose by 1.3 percent in February following a 1.1 percent drop in January. Economists had expected orders to increase by about 1.5 percent.

Economic data is likely to attract some attention on Wednesday, with traders likely to keep an eye on reports on private sector employment and service sector activity.

by RTT Staff Writer

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