Treasurys lose steam
Government debt prices erase earlier gains as stocks rally. Market awaits release of Fed minutes.
NEW YORK (Reuters) -- Treasury debt prices erased most of their gains on Wednesday as a stock market rally picked up steam.
Investors were also awaiting the release of minutes from the central bank's last meeting in April, which they will examine for signs that policymakers are becoming more upbeat about U.S. economic prospects.
"If the Fed gives the inkling that they will not be aggressive or feels that the crisis has ended, then the bond market could get hit hard," said Andrew Brenner, senior vice-president at MF Global.
The minutes, which will be released at 2 p.m. , will contain Fed staffers' quarterly economic forecasts. If any of the "central tendency" numbers -- ranges that strip out the lowest and highest forecasts -- are revised up, it would send a strong signal of growing faith in the recovery from policy officials.
With equity markets around the world putting in a strong showing over the past two months, the Fed's presence in the financial markets is a major factor preventing bond yields from rising more sharply.
Benchmark 10-year notes were up just 1/32 and yielding 3.25%, essentially unchanged on the day.
That's up more than 0.75 percentage point -- which would equal three interest rate hikes by the Fed in its customary quarter-point increments -- since the Fed first unveiled its emergency plan to buy Treasurys back in March.
The U.S. central bank will announce the results of its latest purchases, which will be concentrated on bonds of a 7- to 10-year maturity, at 11 a.m. The last time the central bank focused on this maturity range, on April 21, they took $7 billion worth.
At the short-end of the yield curve, 2-year notes, which have been stuck in a tight range for about 8 weeks, were holding steady at a yield of 0.88%. With longer-term yields climbing, the gap between 10- and 2-year yields was at 235 basis points, its widest since November. 
