Treasury yields pull back ahead of FOMC minutes

Treasury yields pulled back slightly on Wednesday from multi-year highs seen in the previous day, as a sell-off at the long end of the curve eased investor jitters. 

The yield on the 10-year U.S. Treasury note — the key benchmark for U.S. government borrowing — fell more than 1 basis point to 4.69%.

The 2-year Treasury note yield, which more closely tracks short-term Federal Reserve interest rate policy, fell more than 1 basis point to 4.16%. 

The longer-dated 30-year Treasury bond yield fell more than 1 basis point to 5.274% after notching a new 19-year high on Tuesday at over 5.33%.

One basis point is equal to 0.01%, and yields and prices move inversely to each other.

The moves were part of a wider sell-off in long-dated global bonds on Tuesday. Japan’s 10-year bond yield reached its highest level in three decades. German 30-year bund yields hit their highest point since 2011, while rates on France’s 30-year bond reached the highest going back to 2008. 

The U.S. fiscal deficit jumped to $432.3 billion in July, its highest monthly total since March 2021, pushing the year-to-date shortfall to nearly $1.8 trillion. Interest paid to finance the nearly $40 trillion national debt has cost the Federal government about $1.2 trillion this year. 

Meanwhile, negotiations between Washington and Tehran to end the war have stalled, with little sign that talks will resume.

“Investors are watching the unfolding situation in the Middle East and factoring in the potential of an inflation spike that runs hotter and lasts longer than had previously been hoped,” wrote AJ Bell’s head of financial analysis Danni Hewson on Tuesday.

Elsewhere on Wednesday, the latest Federal Open Market Committee meeting minutes are set for release in the afternoon. Investors will likely take a keen eye to the minutes, given the sharp divisions within the central bank. At the July meeting, there were three dissenters voting to hike rates, a division that investors will seek greater detail on.

— CNBC’s Sarah Min contributed to this report.