Treasury prices inched higher Wednesday, but pared gains as the Federal Reserve bought less in short-term debt than some had anticipated.
Yields on 2-year notes which move in the opposite direction of prices, rose 2 basis point to 0.93%. A basis point is 0.01%. Yields on 10-year notes declined 3 basis points to 2.87%.
The central bank bought $2.97 billion in debt maturing in 2010 to 2011 in today's open market operation. See results on the Fed's website.
Analysts said that was much less than the $7.5 billion expected to be purchased. That's approximately how much the Fed has bought during its previous purchases of short-term debt.
Dealers submitted $31.3 billion in debt to be purchased. The Fed will continue its buybacks next week, heading towards purchasing $300 billion in Treasury securities over the next six months.
Bonds also benefited from weakness in equities as Alcoa Inc.'s worse-than-expected loss in the first quarter sparked fears of continuing losses. See more on Alcoa's results.
U.S. stocks also cut into the appeal of the safety of Treasurys, with the Dow Jones Industrial Average last up 0.4%.
Auction on tap
Later on, the Treasury will sell $35 billion in 3-year notes the second of three big auctions this week. Bids are due by 1 p.m. Eastern time.
The last two sales of 3-year notes have received unusually high demand from so-called indirect bidders, a group of investors that includes foreign central banks, noted analyst at Barclays Capital.
Foreign investors continue to hold high amounts of shorter-term bills, analysts note. "We expect a spillover" to short-dated coupons, like 3-year debt, keeping indirect bidder participation high, they said. Barclays is one of the 16 primary U.S. government security dealers required to bid at Treasury auctions.
The government saw tepid demand for its $6 billion in inflation-indexed debt on Tuesday. On Wednesday, it will sell $18 billion in 10-year notes.
Also, Fed policy makers will release around 2 p.m. Eastern time the minutes of their March 18 meeting, when they decided to begin buying Treasurys.
The minutes "should clarify the Fed's thinking about the expansion of quantitative easing, to include Treasuries, after having distanced themselves from such an idea," said strategists at RBS Greenwich Capital.
