NEW YORK - Benchmark U.S. Treasury yields fell on Wednesday to briefly hit six-week lows after data showed that new orders for U.S. made capital goods rose less than expected in April, and before the Federal Reserve releases minutes from its latest meeting.

The drop in capital goods orders pointed to some moderation in business spending on equipment early in the second quarter, and headwinds are growing from rising interest rates and tightening financial conditions. It comes before minutes from the Fed’s May meeting are expected to show that the U.S. central bank remains committed to hiking rates at an aggressive pace in an effort to stem inflation that is rising at its fastest pace in four decades.

Investors will be looking for any new clues on whether weakening economic activity might lead the Fed to slow or pause rate increases.

“I will be especially interested in if they characterize and how they characterize their tolerance for tighter financial conditions, for a weaker labor market, for lower growth in their quest to ultimately bring down inflation,” said Jonathan Cohn, head of rates trading strategy at Credit Suisse in New York.

Benchmark 10-year note yields dropped to 2.708%, the lowest since April 14, before rebounding to 2.734%. They have fallen from 3.203% on May 9. Two-year note yields fell five basis points to 2.476%.

Fed funds futures traders are pricing in 50 basis point rate increases for each of the Fed's June and July meetings, and a chance of the same in September. They have, however, pared their expectations on how high the Fed will raise its benchmark rate, with the federal funds rate now expected to be at 2.87% in March, compared with expectations on Monday of 3.03%. It is currently at 0.83%.

Falling inflation expectations have added to the less hawkish outlook, with breakeven rates on five-year Treasury Inflation-Protected Securities (TIPS), a measure of expected average annual inflation for the next five years, at 2.89% on Wednesday. They have fallen from a peak of 3.62% last month.

The Treasury Department will sell $48 billion in five-year notes on Wednesday, the second sale of $137 billion in new coupon-bearing debt this week. The U.S. government saw strong demand for a $47 billion sale of two-year notes on Tuesday. It will also sell $42 billion in seven-year notes on Thursday. 

(Reporting by Karen Brettell; Editing by Kirsten Donovan)