Treasuries Move Back To The Upside Following Fed Decision

After moving lower over the two previous sessions, treasuries regained some ground during the trading day on Wednesday.

Bond prices gave back ground after an early advance but moved back to the upside following the Federal Reserve’s monetary policy decision.

Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 6.1 basis points to 3.851 percent.

The late-day advance by treasuries came after the Fed announced its widely expected decision to resume raising interest following a pause last month.

The Fed said that it has decided to raise the target range for the federal funds rate by 25 basis points to 5.25 to 5.50 percent. With the increase, the midpoint of the target range is the highest since early 2001.

The decision to increase rates came as the Fed noted inflation remains elevated, while U.S. economic activity has been expanding at a moderate pace and job gains have been robust in recent months.

In his post-meeting press conference Fed Chair Jerome Powell said it is possible the central bank could raise rates again in September or hold steady, noting the central bank plans to take a meeting by meeting approach.

“We’re going to be going meeting by meeting and as we go into each meeting, we’re going to be asking ourselves the same questions,” Powell said.

He added, “So we haven’t made any decisions about any future meetings, including the pace at which we consider hiking, but we’re going to be assessing the need for further tightening that may be appropriate.”

At the same time, the Fed Chief said the central bank can “afford to be a little patient” as they assess incoming economic data.

“The Fed is going to be locked in with all the key inflation data points,” said Edward Moya, senior market analyst at OANDA. “The June CPI report was cooler-than-expected, so if that trend continues, the Fed will probably skip in September.”

Trading on Thursday may continue to be impacted by reaction to the Fed decision, while reports on second quarter GDP, durable goods orders, initial jobless claims and pending home sales are also likely to attract attention.

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