Treasuries on track to end August with gains

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NEW YORK (CNNMoney) -- Treasury yields were mixed Wednesday as investors continued to digest minutes from the latest Federal Reserve meeting.

Traders said the market was also being impacted by month-end portfolio rebalancing as Treasury prices remained on track to end August with solid gains.

The U.S. central bank released minutes late Tuesday from its August meeting of the Federal Open Market Committee. The records indicated that some members had supported a controversial third round of purchases of Treasuries, a strategy known as quantitative easing.

"The minutes from the August FOMC meeting gave hope that more easing may be in store in September," said Jens Nordvig, a fixed-income strategist at Nomura Securities, in a research note.

The minutes lifted both Treasuries and stocks, while weighing on the U.S. dollar, he added.

"However, the moves were small, consistent with the idea that the Fed has limited potency at this point, even if the right intentions are there," said Nordvig.

The Fed's next regularly scheduled meeting is Sept. 20-21.

Meanwhile, some investment funds were moving money around to lock in profits and spiff up portfolios ahead of month-end statements, analysts said.

Pimco's bad bond bet

Bill Gross, who manages the world's biggest bond fund, disclosed Tuesday that Pimco (PTTRX) is now buying Treasuries. This comes after Gross famously bailed out of Treasuries earlier this year because of low yields and inflation concerns.

But demand for Treasuries has remained strong, with prices on the benchmark 10-year note on track to end August with one of the biggest monthly gains of the year.

Investors have been rattled by a darkening economic outlook in the United States and unresolved debt problems in Europe. Despite the recent downgrade of the government's long-term credit rating, U.S. debt is considered one of the safest places to park money in times of uncertainty.

The yield on the benchmark 10-year note was slightly higher Wednesday at 2.2%, up from 2.18% on Tuesday. But the yield is down from about 2.6% at the beginning of August as prices moved higher.

By contrast, stocks were on track to end August with the worst monthly performance in over a year.

On Wednesday, yields on other Treasuries were mixed. Investors flocked to the 2-year note, driving the yield down to 0.12% from 0.26%. The yield on the 30-year bond edged up to 3.56% from 3.51%.

Investors also took in reports on the U.S. labor market and regional manufacturing data.

Challenger, Gray & Christmas said the number of planned job cuts fell 23% in August. Separately, private-sector payrolls rose by 91,000 in August, according to payroll processor ADP. Economists were expecting the private sector to hire 100,000 new workers during the month, down from the 109,000 in the prior month.

On the manufacturing front, the Chicago purchasing managers index dropped to a reading of 56.5 in July compared with a reading of 58.8 the month before. However the number was well above the forecasted reading of 53.0 that economists had expected.

The Commerce Department said June factory orders jumped 2.4%, much better than the 1% decline that economists were are looking for.