(Recasts, adds Fed minutes, comment, changes byline, updates
* Fed minutes say surprised about quick progress in U.S. job
* Benchmark U.S. Treasury note yields hit one-week high
By Gertrude Chavez-Dreyfuss
NEW YORK, Aug 20 U.S. Treasury yields rose to
one-week highs on Wednesday after minutes of the latest Federal
Reserve meeting said the central bank was surprised at the U.S.
labor market's quick progress, suggesting a rate increase would
come sooner rather than later.
Yields on U.S. long government debt advanced for a third
straight session, which may reflect investors' overall comfort
with the pace of the U.S. recovery. It could also mean investors
are booking profits amid a searing government bond rally this
"The Fed came out with a hawkish tone in its minutes and
people's perception is that the Fed will move soon on rates,"
said Tom di Galoma, head of fixed income rates and credit
trading at ED&F Man in New York.
"But I think we're still a long way off. If anything, this
is a good buying opportunity as far as yields go. There's no
corporate supply and the money will end up going to Treasuries."
In minutes of its July 29-30 policy meeting, the Fed cited
the quick recovery in the U.S. labor market but said it doesn't
want to bring forward a planned rate hike until the recovery
looks more convincing.
In late trading, the benchmark 10-year U.S. Treasury note
traded down 6/32 of a point in price, pushing the
yield up to 2.433 percent. The yield hit a one-week high of
The 30-year long bond slipped 2/32, lifting the
yield to 3.223 percent. Yields hit as high as 3.243 percent, a
one-week peak in the aftermath of the Fed minutes,
Prior to the release of the Fed statement, trading was
lackadaisical given a seasonal slowdown and a lack of U.S.
economic data to provide impetus for taking big positions.
Investor concerns over the conflict between Ukraine and
Russian-backed rebels also ebbed. The leaders of Russia and
Ukraine are set to meet next week for the first time in months
to try to end their confrontation over the separatist rebellion
in eastern Ukraine.
"Geopolitical risk has temporarily abated, despite a refusal
by both Ukraine and Russia to support an
unconditional cease-fire," said Michael Woolfolk, global markets
strategist at Bank of New York Mellon wrote clients.
"We continue to believe the bias for Treasury yields is
lower, with the potential for another drop in 10-year yields to
year-to-date lows before Labor Day," Woolfolk wrote.
Another factor keeping many investors on the sidelines is
this Friday's speech by Fed Chair Janet Yellen at the annual
Jackson Hole, Wyoming conference of central bankers.
Expectations among economists are running toward a continuation
of loose U.S. monetary policy for the foreseeable future.
Kim Rupert, managing director at Action Economics in San
Francisco thinks this Treasuries selloff won't be sustained.
"Yellen tomorrow will talk about slack in the labor market,"
(Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by
Daniel Bases and Michael Connor; Editing by James Dalgleish)