U.S. Treasury yields across the curve edged higher on Wednesday, after the Federal Reserve said U.S. interest rates would rise "soon," adding that it will end its asset purchase program in early March.
The Fed, however, did not set a specific date for raising interest rates, although federal funds futures have fully priced in a quarter-point tightening for the Fed's March meeting, and another three hikes for 2022.
"With inflation well above 2 percent and a strong labor market, the Committee expects it will soon be appropriate to raise the target range for the federal funds rate," the U.S. central bank's rate-setting Federal Open Market Committee said in a policy statement.
The rise in yields was muted overall, as investors viewed the Fed statement as dovish on balance. "The statement still leaves a lot of questions to be answered particularly when it comes to the balance sheet roll off. There wasn't a whole lot of detail provided," said Russell Price, chief economist at Ameriprise Financial Services in Troy, Michigan. "The Fed provided some clarity on the prospect of rate hikes but not all the clarity markets were looking for. There's still some uncertainty when it comes to the balance sheet roll off," he added.
In early afternoon trading, the benchmark U.S. 10-year yield rose nearly 2 basis points to 1.8029%. U.S. 30-year yields were flat at 2.1353%. On the front end of the curve, U.S. 2-year yields were little changed at 1.0313%.
January 26 Wednesday 2:24PM New York / 1924 GMT Price Current Net Yield % Change (bps) Three-month bills 0.1875 0.1902 -0.003 Six-month bills 0.37 0.3758 -0.013 Two-year note 99-175/256 1.0353 0.008 Three-year note 99-134/256 1.2892 0.013 Five-year note 99-142/256 1.5928 0.026 Seven-year note 97-138/256 1.7539 0.023 10-year note 96-36/256 1.8065 0.021 20-year bond 96-196/256 2.2024 0.013 30-year bond 94-56/256 2.1383 0.008 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 14.75 1.25 spread U.S. 3-year dollar swap 14.50 0.75 spread U.S. 5-year dollar swap 6.75 -0.25 spread U.S. 10-year dollar swap 6.00 0.25 spread U.S. 30-year dollar swap -18.25 0.25 spread
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