Bond traders held on to their hedges that the Federal Reserve could raise interest rates at the next meeting in September, pricing in a roughly 50% chance of a move following a tame reading of US inflation. The in-line consumer price index reading helped US Treasuries hold gains on Wednesday, with the two-year yield falling three basis points to 4.18% and the benchmark 10-year yield down the same amount to 4.65%. The Fed's benchmark building in Washington, the Marriner S.

Eccles Federal Reserve building, serves as the backdrop for this policy uncertainty. A $42 billion auction of securities is scheduled later in the day. Traders are weighing the risk of a September hike against the potential for a more dovish outlook.