FX.co ★ US 10-Year Yield Falls to 5-Month Low

The yield on the 10-year US Treasury note declined to the 4.0% mark on Wednesday, marking the lowest level in five months. This decrease followed an expected 25 basis points rate cut by the Federal Reserve, which also projected two additional rate reductions within the year. The central bank highlighted growing weaknesses in the labor market, suggesting the need for more accommodating financial conditions. However, the Fed chose not to adjust its unemployment rate forecast for the year beyond the figures established in June. Furthermore, FOMC members' median projections indicated a more positive outlook on real economic growth and unemployment, notwithstanding an increase in core inflation forecasts. As a result, yields decreased more significantly at the shorter end of the yield curve, with a further widening of the spread between the 10-year and 2-year notes. On the funding side, the Federal Reserve continued its quantitative tightening pace despite significant reductions in its overnight reverse repo facility since the last meeting.