By Victor Reklaitis, MarketWatch , Sunny Oh

Investors remain focused on Fed minutes

Treasury prices rose, pulling yields higher Thursday after bond-buyers stepped back into the market to arrest the previous day's selloff that came after Federal Reserve minutes signaled more interest-rate hikes in the offing.

See:Fed minutes say stronger outlook increases the chance for more rate hikes (http://www.marketwatch.com/story/fed-minutes-stronger-outlook-increases-the-chance-of-more-rate-hikes-2018-02-21)

What are key benchmarks doing?

The yield on the 10-year Treasury note was down 2.6 basis points to 2.917%, after notching a fresh four-year high above 2.94% on Wednesday (http://www.marketwatch.com/story/2-year-treasury-yields-extend-climb-ahead-of-fed-meeting-minutes-2018-02-21). The two-year note yield dipped by 2 basis points to 2.250%, while the rate for the 30-year bond edged lower by 1.8 basis pints to 3.205%.

Bond prices and yields move in the opposite direction.

What's driving markets?

The bond market took a breather from Wednesday's selloff as investors said the market had bottomed out. Higher yields can be appetizing to investors who want to buy bonds at cheaper prices.

Investors had dumped government paper Wednesday after Fed minutes from January's gathering suggested the central bank was willing to raise rates beyond the three times it had projected this year in its dot plot, an aggregate of its forecasts. Tighter monetary policy tends to be bearish for bonds as older debt has to be discounted to match the higher yields of fresh issuance.

See: Fed minutes: Stronger outlook increases the chance for more rate hikes (http://www.marketwatch.com/story/fed-minutes-stronger-outlook-increases-the-chance-of-more-rate-hikes-2018-02-21)

After Treasurys rebounded, traders said hedge funds shorting Treasurys may have been forced to "cover" their positions by buying back bonds in order to avoid losses.

Analysts also said investors had managed to digest the $250 billion of fresh issuance without much trouble. The Treasury Department has had to crank up the size of its debt auctions to replenish its cash balances. Growing budget deficits contributed to by tax cuts and an increase to spending caps have put additional pressure on bond-buyers.

What are strategists saying?

"Short positions in Treasury futures are at extreme levels and could pose technical headwinds to higher yields in the near term, with short covering potentially providing a bid for bonds," said Bill Northey, chief investment officer at U.S. Bank Private Client Group, in a note.

"And just like that, the Treasury wraps up their record-breaking week of issuance ... Despite massive size, all were relatively routine affairs and the market appears to have handled them well," said Thomas Simons, senior money market economist for Jefferies.

What was on investors' radar?

Atlanta Fed President Raphael Bostic said the central bank was raising rates in an improving economic environment, giving relief to the financial sector, according to Bloomberg News (https://www.bloomberg.com/news/articles/2018-02-22/fed-s-bostic-says-things-continue-to-look-up-for-u-s-economy-jdyv56g5).

Earlier Thursday, the Fed's vice chairman for supervision, Randall Quarles, said in Tokyo that recent low inflation readings are not "a great concern (http://www.marketwatch.com/story/feds-quarles-says-low-us-inflation-readings-are-not-a-great-concern-2018-02-22)," and the economy is "performing very well."

The number of people applying for employment benefits fell by 7,000 to 222,000 claims (http://www.marketwatch.com/story/us-jobless-claims-drop-7000-to-222000-and-fall-back-to-45-year-low-2018-02-22), below the 230,000 expected by economists polled by MarketWatch.

What are other assets doing?

After Germany's business climate index fell in February (http://www.marketwatch.com/story/german-business-euphoria-fades-in-february-ifo-2018-02-22) from the previous month's record high, the German 10-year government bond yield fell 1.6 basis points to 0.704%, according to Tradeweb data.

(END) Dow Jones Newswires

February 22, 2018 17:00 ET (22:00 GMT)