US Treasury yields shifted dramatically after the Federal Reserve kept interest rates steady, pushing bond traders to pare back their expectations for a hike in September.

The moves on Wednesday pushed yields on two-year US government notes — which are most sensitive to changes in the Fed's policy — lower by two basis points to 4.26%, while the 30-year yield was higher by five basis points at 5.14%. The decision offered a dose of clarity to a deeply divided market that had seen traders betting on a 40% chance of a hike earlier in the day.

Interest-rate swaps now reflect a roughly 70% probability that officials led by Chairman Kevin Warsh boost borrowing costs at their next rate meet in September. They see a hike priced in by October.

In the second policy statement released under Warsh, officials held back from offering much guidance on their plans for further policy moves, reiterating the central bank's commitment to price stability. Policymakers voted 9-3 to hold the benchmark federal funds rate in a range of 3.5% to 3.75%. Dallas Fed President Lorie Logan, Cleveland's Beth Hammack and Minneapolis Fed chief Neel Kashkari dissented in favor of raising rates by a quarter percentage point.

Warsh is expected to take questions from reporters at 2:30 p.m. Washington time.

"The early trade is just relief that Fed didn't move today," said Jack McIntyre, portfolio manager at Brandywine Global Investment Management. The dissents "show you the bias of the FOMC, and unless the inflation and employment data soften meaningfully between now and September, then that meeting is in play for a hike."

--With assistance from Kristine Aquino.