U.S Treasury bonds slump ahead of March FOMC minutes, firm oil prices

The U.S. government bond prices edged down, sending yields higher on Wednesday as investors cooled on safe-haven assets amid gains in riskier assets including stocks and oil. Also, investors pay close attention to the upcoming FOMC meeting minutes in an attempt to estimate the Fed's likely next step to raise interest rate.

The 10-year bonds yields, which is inversely proportional to bond price rose 2 bps to 1.74 pct as compared to 1.72 pct (lowest since 1st March) on Tuesday and 2-year bonds yield dipped 2 bps to 0.862 pct.

Oil futures bounced off 1-month lows as Kuwait's OPEC governor and two sources said all signs suggested a meeting of oil-producing countries on April 17 would deliver an agreement to freeze output. Also, Oil prices rallied after industry data showed that U.S. stockpiles fell below the 9 million barrel per day mark last week for the first time since October 2014. The U.S. crude futures jumped $1.04 to $36.93 per barrel and International Brent futures rose 86 cents to $38.73 by 1216 GMT.

The U.S. services sector expanded at a faster pace in March as the non-manufacturing business activity composite index was 54.5 in the month, compared to 53.4 in February. The MBA mortgage applications week ending 1 April 2016 rose 2.7 pct, from previous down 1.0 pct

On Tuesday, the 2-Year yield found modest downward pressure, holding continuing to hold below 0.75 pct-mark, alongside a larger move in the 10-Year yield, breaking below 1.75 pct. 

Markets now look ahead to minutes from the 15-16 March FOMC meeting that could go a long way in getting market expectations more in line with Fed forecasts, most likely coming as early as the June meeting, significantly less likely in April.

Lastly, we continue to expect the Fed will deliver about 50bps of additional tightening over the remainder of 2016, with an initial move coming at the June meeting and then allowing some cushion to move further at September or December meeting.  

Meanwhile, the S&P 500 futures traded higher 0.09 pct at 2040.25