10-Year Treasury Yield Pares Gains, Ends Higher After Fed Meeting | Sidnaz Blog

Federal Reserve Chairman Jerome Powell testifying before a Senate committee in December.



The yield on the benchmark 10-year Treasury note pared a steep climb Wednesday to finish slightly higher after Federal Reserve Chairman

Jerome Powell

reiterated the central bank’s commitment to supporting the economy until it fully recovers from the coronavirus pandemic.

The 10-year yield, which rises when bond prices fall, finished Wednesday’s session at 1.641%, according to Tradeweb, up from 1.622% at Tuesday’s close. It had climbed past 1.68% before the Fed said it would continue to hold interest rates low and buy billions of dollars of bonds.

Yields on longer-dated bonds have climbed recently to their highest levels since the pandemic started, fueled by bets that distribution of vaccines and new stimulus money will lead to strong economic growth and inflation.

Yields retreated after Mr. Powell said during a press conference following the Fed’s announcement that the central bank would hold short-term interest rates near zero until the economy reaches maximum employment and sustained 2% inflation—conditions they don’t expect met this year.

Most of the 18 Fed officials still expect the Fed to hold short-term interest rates near zero through 2023, according to updated projections released Wednesday. Seven officials now expect to start lifting rates in 2022 or 2023, up from five in December, though Mr. Powell said he “wouldn’t read too much into” the so-called dot plot for March.

Some investors had thought that more officials might have expected to raise rates by 2023.

The gap between five- and 30-year Treasurys reached its widest in more than six years after the Fed’s announcement, a sign investors expect a future acceleration of growth and inflation.

Yields on short-term Treasurys, which are particularly sensitive to the outlook for monetary policy, fell after the Fed released its policy statement. The yield on the three-year note led declines, falling to 0.288% from 0.333% on Tuesday.

Write to Sebastian Pellejero at [email protected]

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