The Federal Reserve raised its benchmark interest rate by 25 basis points on Wednesday, its first hike since July 2023, and Treasury yields edged lower Thursday in response. Fed Chair Kevin Warsh signaled more increases could follow this year, even as President Trump kept pressuring the central bank to cut rates instead.
Treasury yields edged lower on Thursday, a day after the U.S. Federal Reserve raised interest rates for the first time in three years. The 10-year Treasury yield fell 2 basis points to 4.984% as of 4:55 a.m. ET.
The 30-year Treasury yield slipped 1 basis point to 5.334%. The 2-year yield dropped 2 basis points to 4.705%. One basis point equals 0.01%, and yields and prices move in opposite directions.
Fed lifts rates to 3.75%-4% range
The Fed raised its benchmark rate by 25 basis points to a target range of 3.75%-4% on Wednesday, its first increase since July 2023. Markets had widely expected the central bank to approve the rate hike, after a series of hot inflation data and pressure on the bond market.
According to CNBC, Fed Chair Kevin Warsh said during a Wednesday press conference that "inflation has been too high … for too long". He said the Federal Open Market Committee had decided that its standard for confidence in falling inflation had not been satisfied.
More hikes possible this year
Fed officials also signaled that another rate increase is likely this year. 16 of the 18 participants in the Fed's dot-plot projections expected another increase, with four seeing two more hikes as possible.
Trump keeps pressuring Warsh over rates
Traders are also watching the working relationship between Warsh and President Donald Trump, who continues to push for lower rates. Trump said in a social media post that U.S. interest rates should be at 1% or lower, citing the country's credit standing. He also told reporters on Wednesday that the Fed's board is being overly political and making the wrong decision, according to CNBC.
Bob Edwards, chief investment officer at Edwards Asset Management, said in a Thursday note that the bond market's biggest moves are likely now in the rearview mirror. He said investors now have a good opportunity to lock in the elevated yields, and predicted that a further Fed hike would more likely come at the December meeting than in October, given the proximity of the midterm elections.
Source: CNBC
Trading involves risk.
Risk Disclaimer
