Bond Report: Treasury yields remain lower during Powell news conference following biggest Fed hike in almost 28 years

by | Jun 15, 2022 | Stock Market

Treasury yields remained broadly lower Wednesday afternoon after Federal Reserve policy makers raised their main policy rate target by 75 basis points for the first time since November 1994.In a post-meeting press conference, Fed Chairman Jerome Powell told reporters that a 50-basis-point or 75-basis-point hike is on the table for July.

What are yields are doing
The 2-year Treasury note yield 
fell to 3.26% from 3.435% late Tuesday, which was its highest level since Nov. 14, 2007, according to Dow Jones Market Data. Wednesday’s drop comes on the heels of the largest eight-day yield rise for the 2-year note since Aug. 14, 1989, as of Tuesday.

The yield on the 10-year Treasury note 
 dropped to 3.378% from 3.482% on Tuesday, which was the highest level since April 14, 2011. As of Tuesday, the yield had seen its biggest five-day rise since Oct. 14, 2008.

The yield on the 30-year Treasury bond 
 slipped to 3.377% from 3.432% on Tuesday. Tuesday’s level was the highest since Nov. 2, 2018.

What’s driving the market? As expected, U.S. policy makers lifted the fed funds rate by three quarters of a percentage point, to between 1.5% and 1.75%, a hike of the biggest magnitude in almost 28 years. In a press conference, Fed Chairman Jerome Powell told reporters that policy makers came around to the view that “front-loading” rate hikes was needed, and will be looking for compelling evidence of inflation coming down. While some fear more aggressive action could trigger a recession, the Fed was under pressure to act forcefully after last Friday’s surprise May consumer-price index reading, which showed the annual headline inflation rate surging to a 40-year high of 8.6%. In addition, prices of wholesale goods and services jumped 0.8% in May, Tuesday’s data showed.On Wednesday, the median projection of Fed policy makers is for U.S. inflation, as measured by their preferred gauge, to exceed 5% by the end of 2022 — …

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