The US Treasury yield of ten years reached 1.74% on Thursday morning, despite assurances by the Federal Reserve that it did not intend to raise interest rates any time soon, nor did it reduce its bond-buying program.
The yield on the standard 10-year treasury note began at 5:15 p.m. Some gains reduced to 1,722%. The return on the 30-year Treasury bond was at 2,483%. Yields move inversely to prices.
Following the Fed’s two-day policy meeting, which concluded on Wednesday, the central bank said it saw stronger economic growth than previously forecast, and predicted that gross domestic product would rise to 6.5% in 2021. This is higher than the GDP increase of 4.2% in December.
The Fed also expected core inflation to reach 2.2% this year, but a long-term expectation that it would remain around 2%.
The US Federal Reserve has also indicated that it does not intend to raise interest rates until 2023 and that it is continuing its program of buying at least $ 120 billion worth of bonds per month.
Fed Chairman Jerome Powell reiterated that the central bank wants inflation constantly above its 2% target, and significant improvement in the US labor market, before considering rate changes or monthly bond purchases.
Quilter Investors’ portfolio manager, Hinesh Patel, said on Wednesday following the Fed’s policy decision: “although no response is currently the only move being offered, no matter what Powell is doing at the moment, the Fed is taking bond markets to the danger zone. “
“If they do nothing, the bond market will increase returns, and the Fed wants to increase to buy or adjust the bonds, but if he acts now, he is accused of stimulating too much and getting too hot,” he said. he explained.
However, Willem Sels, chief investment officer for private banking and wealth management at HSBC, said the Fed’s message of a gradual normalization of the policy meant that it was a “very different situation than in 2013, where the decline in securities surprised the market. , and that real returns can rise rapidly and significantly, causing shares, gold and risk assets to sell. ‘
There were concerns that the recent rise in yields and inflation expectations could mean a repeat of the ‘taper tantrum’ in 2013. That was when treasury yields suddenly rose due to market panic after the Fed said it planned to cut its quantitative easing program.
On Thursday, weekly data on unemployed claims must be presented at 08:30 ET.
Auctions are being held Thursday for $ 40 billion of four-week accounts, $ 40 billion of eight-week accounts and $ 13 billion of 9-year 10-month treasury inflation-protected securities.
– Thomas Franck of CNBC contributed to this report.