Treasurys fall as Fed reports modest recovery
Bond prices slip as report on activity from regional banks shows economic improvements.
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NEW YORK (CNNMoney.com) -- Bond prices fell Wednesday after the Federal Reserve released its latest report showing signs of a stabilizing economy.
Demand for the perceived safety of U.S. debt waned after the Federal Reserve said "reports of gains in economic activity generally outnumber declines" in the most recent edition of the Beige Book.
Bond prices were also weighed down by strong corporate earnings results after Wells Fargo (WFC, Fortune 500) and Morgan Stanley (MS, Fortune 500) topped estimates.
"We have some inside buying going on with the Fed's purchase of Treasurys, but if we continue to get good strength in earnings, which is looking more and more likely, bond prices will be under pressure," said Bill Larkin, portfolio manager at Cabot Money Management.
The Federal Reserve's purchase of government debt is part of an ongoing plan to purchase $300 billion worth of such assets in an effort to keep interest rates in check and spur economic recovery.
But after a solid earnings season and with the economy showing signs of recovery, the Federal Reserve may move to normalize interest rates from their historic low near zero, Larkin said.
"Everything is indicating that the economy is improving, but the bond market is still priced in a bunker mentality," he said. "The yields are very expensive at the current rates and they're not getting adequate protection for a substantial recovery."
Bond prices: The benchmark 10-year note was down 12/32 to 101 31/32 and its yield rose to 3.39% from 3.34% late Tuesday. Bond prices and yields move in opposite directions.
The 30-year bond lost 23/32 to 104 31/32. Its yield was 4.21%.
The 2-year note eased 2/32 to 100 3/32, with a yield of 0.96%. 
