FX.co ★ US 10-Year Yield Rises to 19-Year High

The yield on the 10-year US Treasury note climbed above 5.01% on Wednesday, its highest level in 19 years, after the Federal Reserve raised interest rates by 25 basis points. The move had been widely anticipated by financial markets following recent data showing elevated inflation, low unemployment, and robust consumer spending. Projections from FOMC members indicated the possibility of one or two additional rate hikes by next year, in line with upward revisions to inflation forecasts and downward revisions to unemployment estimates. In addition to higher inflation driven by surging energy prices, Chairman Warsh also noted that Treasuries have faced pressure as they compete for capital against a sharp increase in corporate debt issuance. Even so, yields on longer-term maturities rose by less than those on shorter-dated securities, as the Fed’s unanimous decision to raise rates to combat inflation helped restore some of the central bank’s credibility, after Chairman Warsh had previously downplayed the urgency of increasing the federal funds rate to contain price growth.