Treasuries Close Firmly In The Red Amid Renewed Fed Worries

(RTTNews) - After initially showing a lack of direction, treasuries came under pressure over the course of the trading day on Wednesday.

Bond prices pulled back firmly into negative territory, adding to the steep losses posted in the previous session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 4.9 basis points to 2.897 percent.

With the increase on the day, the ten-year yield added to the 9.9 basis point gain posted on Tuesday, climbing back near the two-year closing high set last month.

The weakness among treasuries was partly due to renewed concerns about the outlook for the Federal Reserve's stimulus program following comments from San Francisco Fed President John Williams.

Speaking to community leaders in Portland, Oregon, Williams said Fed Chairman Bernanke's timetable calling for scaling back the central bank's asset purchases later this year and ending them around the middle of next year is still the best course forward.

However, Williams stressed that the adjustments to the asset purchases will depend on what the incoming data says about the outlook for employment and inflation.

Treasuries saw continued weakness following the release of the Fed's Beige Book, a compilation of anecdotal evidence on economic conditions from each of the twelve Fed districts.

The Beige Book said national economic activity continued to expand at a modest to moderate pace during the reporting period from early July through late August.

Most districts also reported increases in consumer spending as well as hiring that held steady or increased somewhat, the report said.

A slew of economic data is scheduled to be released on Thursday, including reports on private sector employment, weekly jobless claims, and service sector activity.

Reaction to the data may be somewhat subdued, however, as traders are likely to be looking ahead to release of the closely watched monthly jobs report on Friday.