Treasury yields fall after Fed rate hike
Treasury yields fell across maturities after the Federal Reserve raised rates by a quarter point and kept a hawkish stance. The 10-year yield dropped 7 basis points to 4.95%, while the 2-year, 5-year and 30-year also eased.
The bond market spent five months demanding that the Federal Reserve take inflation seriously. On Wednesday it got its answer, and on Thursday it rallied. 04% level it touched Tuesday, the highest since July 2007. Before Thursday, the 10-year yield had risen for eight consecutive sessions, the longest streak since 2022.
31%. That is a curve rallying the day after a central bank raised rates and told everyone it was not finished. Which is precisely the point. Chart: 10-Year Yields Erase Fed-Meeting Jump Look At The Breakevens, Not The Headline Yield The clearest evidence sits in the inflation-protected market.
The 10-year TIPS yield fell by only 2 basis points on Thursday, compared with 7 basis points on the nominal note. 36%. Nominal yields did not fall because growth expectations cracked. They fell because the inflation premium embedded in them came out.
Investors are asking for less protection against future price increases, which is the textbook definition of a central bank regaining credibility. “The Fed sent a strongly hawkish message at its September meeting. The statement removed the language around inflation being partly due to supply shocks. , no more excuses,” said Bank of America economist Aditya Bhave.
Short rates went up because the Fed is hiking. Long rates did not, because the market decided the hiking works. S. rates and more moderate increases in longer-dated rates,” Bhave added.
Bank of America maintains its call for two more 25-basis-point hikes, in October and December. 75% to 4%. “Inflation remains elevated,” the committee said in its statement. Peter Williams of 22V Research argued the hawkishness was not in the hike at all.
1%. Twelve of 18 officials see a single additional hike; four see two. Williams also flagged that the risk assessments carry “its most optimistic skew ever on growth risks” alongside one of its worst on inflation. ” The Data Is Not Helping The Doves Thursday’s releases reinforced the picture.
Initial jobless claims approached a 60-year low. 1%. 5% — the strongest in nearly two years, and broad-based across 12 of 13 categories. Bond Funds Remain Near One-Year Lows The two-day move has not repaired the year.
19 high. S. Aggregate Bond ETF (NYSE: AGG ) are both within pennies of their own 52-week lows. Read Also: Photo: Shutterstock