Fed Report Drives Late Treasury-Price Rebound; Milder-Than-Expected Tone On Inflation, Rate Rises Helps Reassure the Market
U.S. Treasury prices rebounded late yesterday into positive territory after the release of the minutes from the Federal Reserve's last meeting proved less severe than expected.</br></br>Market participants had been braced for tougher talk on inflation in the minutes, especially after one member of the policy-setting Federal Open Market Committee opposed the decision to pause at the Aug. 8 meeting.</br></br>Instead, market participants interpreted the Fed minutes as reiterating what they already knew -- namely that the central bank would continue to watch inflation but was comfortable leaving rates unchanged to better gauge the impact of its policy on the economy.</br></br>This encouraged investors to move in and buy Treasurys after they had spent much of session earlier selling government securities.</br></br>"The market had prepared itself that the statement would be much more negative with regard to inflation and possible future rate hikes," said Gary Pollack, managing director of Deutsche Bank Private Wealth Management in New York.