The 10-year Funds yield inched lower Wednesday after briefly topping the 4% mark as investors bet that perhaps the Federal Hold back wouldn’t cut rates as aggressively as hoped for this year.
The 10-year Treasury yield was last down more than three footing points to 3.911, after touching above the key 4% mark earlier in the morning. The 2-year Treasury yield was ultimately trading at 4.333% after gaining half a basis point. Yields and prices have an inverted relationship and one foundation point equals 0.01%.
The 10-year Treasury yield was in a steep downtrend to end 2023 since spooking investors by rising over 5% in October. The 10-year yield closed out last year at around 3.83%. The downturn helped fuel a year-end revival in stocks.
10-year Treasury yield, 6 months
But that has reversed this year with investors dispute whether the market is getting too optimistic about how aggressively the Fed may cut rates this year. The Fed changed its hawkish tune mid-December, presage three rate cuts in 2024. Traders began betting the Fed would be even more aggressive than that and also make a move to lower rates pretty soon into the new year.
Richmond Federal Reserve President Thomas Barkin on Wednesday well-known that interest rate hikes were still “on the table” even though the Fed is making “real progress” on inflation.
Trendies from that Fed’s December meeting released Wednesday indicated that many officials seemed satisfied with the just out progress made on the inflation front, and deem cuts appropriate at some point in 2024. However, the minutes also offered that the Fed intends to maintain a restrictive stance in the short-term as uncertainties linger.
“Participants generally stressed the importance of preserving a careful and data-dependent approach to making monetary policy decisions and reaffirmed that it would be appropriate for policy to linger at a restrictive stance for some time until inflation was clearly moving down sustainably toward the Committee’s uncoloured,” the minutes stated.
According to CME Group’s FedWatch tool, markets are currently pricing in an over 64% chance of the beforehand rate cut taking place in March.
Other economic reports released Wednesday offered greater clues into the stately of the economy and the labor market. November’s JOLTS report came about in line with expectations at 8.79 million pursuit listings, while December’s ISM Manufacturing report, also released on Wednesday, registered a 47.4 reading. This was high-priced than both consensus estimates and the previous month’s level, indicating expanding demand.
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