Benchmark Treasury prices cut gains Wednesday after an underwhelming auction of 10-year notes, leaving yields on track to fall for just the second time in 10 sessions. The 10-year note (10_YEAR) yield, which falls as prices rise, was down half a basis point on the day at 2.633%. The yield is up 19.5 basis points since bouncing off an 11-month low of 2.438% at the end of May.

The move comes after an auction of $21 billion in 10-year notes failed to impress. The notes sold at a yield of 2.648%, higher than where the broader market was trading at the time.

“The market apparently wants to take a wait-and-see approach with next week’s Fed’s meeting hanging over the market,” said Adrian Miller, director of fixed-income strategy at GMP Securities, in a note. Nomura Securities awarded the auction a grade of B-.

Indirect bidding was below average, with investors taking down 36.1% of the debt, compared with an average of 47.1% in the last six sales. Indirect bidders often include foreign central banks. Direct bidders, which can include domestic money managers, bought 19.4% of the sale, compared with 17.5% in recent sales.

Bidders offered to buy 2.88 times the amount of debt for sale, compared with the recent average of 2.69 times.

Trading action across the capital markets has been relatively subdued with low volatility and low volumes. This has worried some investors. Jim Sarni, managing principal at Payden & Rygel, called it a “a widespread calmness in the markets that is disconcerting. There seems to be somewhat of a cavalier attitude.”

The rise in Treasury yields in recent sessions reverses a sharp drop during the spring, as the market eluded the expectations of most investors and rose. The moves raised concerns about the pace of economic growth and stoked speculation about how and when the central bank would raise its key lending rates. The rally was aided by technical positioning in the market, which gained as investors closed out short positions and bought into the rally.

However, many strategists see the market returning to a focus on the fundamentals of the U.S. economy, which is showing steady improvement in inflation and labor conditions. That may push bond yields higher as investors begin to revise forward expectations of when the Fed hikes rates. Traders who bet on the future path of the fed funds rate expected the first hike to come in July of next year, according to CME FedWatch.

“U.S. Treasurys have begun the process of unwinding overbought conditions that had developed during the course of this year’s rally,” said William O’Donnell, head Treasury strategist at RBS, in a note to clients. He added that the recent rise in rates may be sustainable over the next few months.

The 30-year bond (30_YEAR) yield fell half a basis point on the day to 3.463%. The 5-year note (5_YEAR) yield fell 2 basis point to 1.689%.

By Ben Eisen