FX.co ★ Treasury Yields Fall After Fed

The yield on the US 10-year Treasury note retreated to 4.99% on Thursday, slipping below the 5.04% peak last seen in 2007 and reached earlier in the week. The move followed the Federal Reserve’s decision to raise interest rates and Chair Warsh’s reaffirmation of the central bank’s commitment to fighting inflation, which helped reassure investors about the Fed’s policy credibility and its determination to contain price pressures.

The Fed lifted the target range for the federal funds rate by 25 basis points, its first rate increase since July 2023, and signaled at least one additional hike in borrowing costs later this year. Although the move had been fully priced in ahead of the announcement, investors had worried that an unexpected decision to keep rates on hold might have sparked a bout of market volatility.

Elsewhere on the curve, the yield on the 2-year Treasury note, which is more sensitive to near-term Federal Reserve policy expectations, edged down to 4.73%. The yield on 30-year Treasury bonds, which tend to be more influenced by longer-term inflation dynamics and geopolitical risks, declined to 5.34%.