The release of the minutes from the Federal Reserve's July FOMC meeting yesterday sparked a sharp sell-off in the U.S. Treasury market.

The selling continued overnight in Asian trading, and early this morning, the yield on the 10-year Treasury note rose to another new multi-year high of 2.94%.

Since then, yields have retraced slightly to 2.92%, but 10-year Treasury futures are still down 0.4% today.

"The stakes have been upped for the bond market this summer and the short-lived reaction and relief (lower yields) to the wobble in emerging markets confirmed that investors are desperate to avoid being caught out by strong incoming data and reduced asset purchases by the Fed next month," says Société Générale analyst Kenneth Broux. "The FOMC minutes yesterday did not try to dampen expectations that tapering could start in September and US yields duly pushed to 2.93% in Asia (swaps 3.14%), supporting the USD but giving EM currencies another headache."

The next big market mover is the release of weekly jobless claims figures in the United States, due out at 8:30 AM ET. Economists predict initial claims rose to 330,000 in the week ended August 17 from 320,000 the week before. Continuing claims are expected to have ticked down to 2.965 million in the week ended August 10 from 2.969 million in the previous week.

The bond market has been on edge for most of 2013 as the prospect of a reduction in the pace of bond purchases the Federal Reserve makes under its quantitative easing program has become more and more likely with each strengthening economic data point. Now, the consensus on Wall Street holds that the Fed will begin this "tapering" process at its next FOMC meeting in mid-September.

Today's claims release may give us an additional clue as to whether or not this will prove to be the case.

"The lack of conviction for September [tapering] largely stems from lingering uncertainty over the underlying health of the labor market and the broader economy," says Deutsche Bank economist Joe LaVorgna. "As such, the August employment report, which is released on September 6, is likely to be the defining event. Ahead of this, the trend in jobless claims will be closely scrutinized, given this series’ prowess as a payroll forecasting tool."

The chart below shows trading in 10-year Treasury futures.

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