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FinanceTreasury sell-off deepens after Fed holds rates; 30-year yield hits 5.236%
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U.S. Treasury yields rose sharply on Thursday as markets reacted to the Federal Reserve's decision to hold interest rates steady at 3.5%-3.75% in a 9-3 vote. The 30-year bond yield surged over 9 basis points to 5.236%, its highest since July 2007, while the 10-year yield climbed above 8 basis points to 4.7%. The Fed cited solid economic activity and stable employment despite Middle East uncertainty. Deutsche Bank analysts predict two 25-basis-point rate hikes in September and December, noting that rising long-end rates and declining forward real yields suggest doubts about price stability. Markets are also awaiting weekly jobless claims and June PCE inflation data, with expectations of 3.7% headline and 3.3% core inflation.
Source report
U.S. Treasury yields continued their upward climb on Thursday as investors weighed the Federal Reserve's decision to hold interest rates steady and sought insight on future monetary policy decisions.
Key Market Movements
At 3:20 a.m. ET:
- 30-year Treasury bond: Rose more than 9 basis points to 5.236%, after hitting its highest level since July 2007 on Wednesday.
- 10-year Treasury note: Soared over 8 basis points to 4.7%.
- 2-year Treasury note: Rose 5 basis points to 4.289%.
Note: One basis point equals 0.01%. Yields and prices move in opposite directions.
Fed Decision
On Wednesday, the Federal Reserve voted to hold its key interest rate steady at a range of 3.5% to 3.75% in a 9-3 vote. This marked the second FOMC meeting under Chairman Kevin Warsh.
The FOMC statement said:
"Economic activity is expanding at a solid pace despite elevated uncertainty that owes, in part, to the conflict in the Middle East."
"Job gains have kept pace with the workforce, and the unemployment rate has changed little."
Analyst Outlook
Deutsche Bank analysts noted the Treasury sell-off continuing overnight. Their economists still expect the Fed to raise rates by 50 basis points this year — implying a 25-basis-point hike in both September and December.
However, the analysts added:
"They think the FOMC is unlikely to take much comfort in yesterday's market reaction, with the rise in long-end rates coupled with the decline in forward real yields suggesting doubts about an imminent return of price stability."
They also noted that overall U.S. credit conditions remain supportive, but a steeper yield curve could add pressure to the weak housing market.
Upcoming Data
Investors will also watch for:
- Weekly jobless claims
- Personal consumption expenditures (PCE) price index reading for June
According to a Dow Jones estimate:
- Headline inflation: Expected to have grown by 3.7% annually
- Core inflation (excluding food and energy): Expected to have risen 3.3%
Source
US Top News and AnalysisWestern
Part of this Story
Treasury sell-off continues after divided Fed holds interest rates steady