Treasurys mixed after Fed
Government bonds end the day almost even, after being down early in the day, after the Federal Reserve announced that it will hold interest rates steady at 2%.
NEW YORK (CNNMoney.com) -- Treasury prices recovered some of their loses from earlier in the day after the Federal Reserve announced its decision to hold the key federal funds interest rate at 2%.
The benchmark 10-year note was down 12/32 to 97 23/32, and its yield rose slightly to 4.11%, up from 4.10% late Tuesday. The 30-year bond recovered lost ground to be down only 1/32 to 95 16/32, and its yield was 4.65%, even with late Tuesday.
The 2-year note moved higher to 100 3/32, and the yield fell to 2.82% from 2.85% late Tuesday. Bond prices and yields move in opposite directions.
Bond traders were expecting the Fed to leave the rate unchanged at 2%, so while there was no surprise in the Fed's decision, economists zeroed in on the language of the statement the Fed released.
The Federal Open Market Committee said, "recent information indicates that overall economic activity continues to expand," in its statement. The Fed statement admits inflation is a priority: "In light of the continued increases in the prices of energy and some other commodities and the elevated state of some indicators of inflation expectations, uncertainty about the inflation outlook remains high."
Digesting the Fed statement: "If you look at their characterization of inflation this time versus last time, you could argue that it is more hawkish [favoring an increase in interest rates]," said John Hendricks, senior vice president of Hartford Investment Management Co. and a senior fixed income trader. "While I think that is a legitimate argument, I think you need to look at the entire tone."
Hendricks says that considered in total, the Fed's statement is "very middle of the road," and he expects the 10-year note to trade within a yield range of 3.95% and 4.25% in the next couple of months as economists wait for more data.
Given the Fed's concerns over inflation, Hendricks thinks the 2-year note and the 5-year note will be safer places to keep your assets. "Why would you want to lock yourself into a long term investment if inflation is rising?" he explains.
The Fed's statement says, "Although downside risks to growth remain, they appear to have diminished somewhat, and the upside risks to inflation and inflation expectations have increased."
Michael Cheah, senior portfolio manager at AIG SunAmerica, says the Fed is focusing on inflation over economic weakness. "They are trying very hard to ignore the weak data in order to talk hawkish - in order to fight inflation," he said.
According to Cheah, if the Fed statement is indicating that it will raises rates, making money more scarce, consumer spending decreases, hurting businesses and the stock market. If people "feel poorer," said Cheah, they move their money into the bond market.
"I think people are going to move money out of the stock market and after a period of the stock market weakness, money will move into the bond market," said Cheah.
Prior to this announcement, the Fed had cut rates seven consecutive times since September, in an effort to bolster the lagging economy by making money more readily available to investors. The rate cuts have supported the bond market because in times of economic uncertainty, investors tend to shift assets into safer havens, like government issued bonds. 
