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Treasuries Close Roughly Flat Following Fed Minutes

Treasuries showed a lack of direction throughout the trading session on Wednesday before ending the day roughly flat.

Bond prices spent the day bouncing back and forth across the unchanged line. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, ended the day flat at 2.345 percent.

The choppy trading came as traders awaited the release of the minutes of the Federal Reserve's latest monetary policy meeting, although treasuries continued to show a lack of direction following the release of the minutes.

The minutes of the Fed's September meeting said many participants expressed concern that the low inflation readings this year might reflect not only transitory factors but also the influence of developments that could prove more persistent.

"A few of these participants thought that no further increases in the federal funds rate were called for in the near term or that the upward trajectory of the federal funds rate might appropriately be quite shallow," the Fed said.

The central bank added, "Some other participants, however, were more worried about upside risks to inflation arising from a labor market that had already reached full employment and was projected to tighten further."

The Fed subsequently said many participants thought that another increase in interest rates later this year is likely to be warranted if the medium-term outlook remained broadly unchanged.

"In short, the majority of Fed officials are worried that core inflation might not rebound quickly, but that isn't going to stop them from continuing to normalize interest rates, particularly not when the unemployment rate is getting so low," said Paul Ashworth, Chief U.S. Economist at Capital Economics.

He added, "A few wanted to delay the next rate hike until there were clear signs of a rebound in core inflation, but most were content to simply wait for the next few inflation reports."

Meanwhile, traders largely shrugged off the results of the Treasury Department's auctions of $24 billion worth of three-year notes and $20 billion worth of ten-year notes.

Trading on Thursday may be impacted by reaction to reports on weekly jobless claims and producer price inflation.

Bond traders are also likely to keep an eye on the results of the Treasury's auction of $12 billion worth of thirty-year bonds.

by RTTNews Staff Writer

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