FX.co ★ US 10-Year Yield Holds Rebound

The yield on the 10-year US Treasury note rose to 4.09%, up from a more than two-month low of 4.04% reached on February 16th, after minutes from the Federal Reserve’s latest meeting signaled a more hawkish tone from the FOMC. Several policymakers suggested that the disinflation of consumer prices could take longer than previously anticipated, implying a more extended pause before the Fed begins cutting interest rates.

While the most recent CPI reading, released after the Fed’s January meeting, came in below expectations at 2.4%, it still stands comfortably above the central bank’s 2% target, a level last seen five years ago. The minutes also revealed that a number of FOMC members see a potential need for further rate hikes to fully contain inflation, highlighting ongoing divisions within the committee.

At the same time, longer-dated Treasuries came under additional pressure amid speculation that incoming Fed Chair Kevin Warsh could advocate for a smaller central bank balance sheet, consistent with his earlier criticism of quantitative easing during the global financial crisis.