U.S. Treasury Yields Slip After Federal Reserve Raises Rates

Treasury yields fell modestly on Thursday following the Federal Reserve’s first rate hike in three years. The 10-year Treasury yield was down 2 basis points to 4.986% at 6:16 a.m. ET, while the 30-year and 2-year yields slipped 1 basis point each to 5.333% and 4.715% respectively.

The Fed raised its target range for the federal funds rate by 25 basis points to 3.75%-4.00%, a move that market participants had largely anticipated after recent inflation data and pressure on bond markets. The central bank’s decision was accompanied by comments from Fed Chairman Kevin Warsh, who said inflation had been "too high ... for too long" and that policymakers were not yet confident that price pressures were receding at a sufficient pace.

The Federal Open Market Committee’s dot-plot indicated that most officials expect at least one more increase this year, with a minority seeing the possibility of two additional hikes.

"Interest rates in the United States should be 1 per cent, or less, because we are the best credit in the world — by far," President Donald Trump wrote on social media, adding that the Fed’s board was "very hostile … very political" and "doing the wrong thing."

Bob Edwards, chief investment officer at Edwards Asset Management, said the bond market’s biggest moves were likely behind it and suggested investors could now lock in the higher yields. He noted that any further rate increase would probably be delayed until the December meeting to avoid the perception of political timing ahead of the midterm elections.