Longer-dated notes led the decline, which was initially triggered by ADP Research data showing employment at US companies increased by more than forecast in October.

With debt offices slashing sales of longer-maturity debt, the recent drop in 30-year bond yields is likely to run further.

While the Federal Reserve delivered a quarter-point rate reduction as expected, Powell said another by year-end is not a given.

Yields on 10-year notes rose two basis points to 3.99% after falling the previous two sessions, while monetary policy-sensitive two-year notes held steady around 3.49% Wednesday morning.

The Federal Open Market Committee is expected to announce guidance on the end of its quantitative tightening program later Wednesday. As that process draws to a close, experts are questioning when and how the central bank should use its balance sheet to smooth economic stress in the future.

The Federal Reserve Friday issued a set of proposed changes to its stress testing program for the largest banks that would disclose the central bank's back-end stress testing models, a move that the Fed had long opposed out of fear of making the tests easier for banks to pass.

The consumer price index for September — delayed by the federal government shutdown — showed core prices rose 0.2% on a monthly basis, less than the 0.3% expected.

Traders are shifting their focus to Friday's release of the consumer price index, the first real glimpse on the state of the economy since the start of the US government shutdown.

Federal Reserve Governor Stephan Miran said the economic standoff with China could increase market volatility, further necessitating the central bank to move its policy stance to neutral.

Over the past two years, volume in the $30 trillion US government bond market was about 58% higher than average on the last trading day of the month, the New York Fed found.

The government closure that began on Oct. 1 has delayed the release of official data that traders rely on to assess growth and inflation and gauge the Fed's next steps, after it eased last month for the first time this year.

Legal experts say the Supreme Court's decision not to immediately rule on a request to remove Federal Reserve Gov. Lisa Cook from office suggests that, whatever the court's views on independent agencies may be, it views the central bank differently.

The ongoing government shutdown prevented the Bureau of Labor Statistics from releasing its September jobs report Friday, but job growth appears to be softening. The lack of reliable government data comes as the Federal Reserve mulls further interest rate cuts. 

The Supreme Court said Wednesday that it would defer President Donald Trump's request for a stay until after oral arguments scheduled for January 2026, allowing Federal Reserve Governor Lisa Cook to remain on the board at least until then.

In a unanimous vote, the Board of Governors moved to lower Morgan Stanley's stress capital buffer requirement to 4.3%, down from a preliminary 5.1% based on this year's stress test results.

But even if global financial crisis 2.0 doesn't come, investors may well be in for a rough ride in the coming months as frothy financial markets come to terms with a cyclical slowdown.

Bank reserves fell by about $21 billion to $2,999.7 trillion in the week through Sept. 24, according to Fed data released on Thursday. That's the lowest level since the week through Jan. 1.

Federal Reserve Chair Jerome Powell said in a speech Tuesday that the central bank's policy stance is "modestly restrictive," a stance that will give the central bank flexibility to react to an uncertain economic future.

Federal Reserve Vice Chair for Supervision Michelle Bowman said in a speech Tuesday that steeper interest rate cuts should be on the table if the labor market continues to show signs of decline.

President Donald Trump asked the Supreme Court to reverse a lower court ruling allowing Federal Reserve Gov. Lisa Cook to remain in office pending the outcome of her lawsuit challenging Trump's move to fire her late last month.