Treasury yields jump after the Fed hikes, signals 2 more increases this year

bond trader, bond broker

  • The Federal Reserve raised its key rate by 25 basis points and signaled two more rate hikes this year.
  • Treasury yields rose following the rate announcement.
  • Follow Treasury yields in real time here.

US Treasury yields rose after the Federal Reserve raised its key rate and signaled two more hikes this year, a greater amount than previously expected.

The Federal Open Market Committee voted to lift the target range for the federal funds rate by 25 basis points to between 1.75% and 2%. Total rate hikes projected for 2018 is up to four from three previously. 

Treasury yields, which move opposite of bond prices, jumped following the rate announcement. 

Yields have been climbing this year, as markets position for a relatively more aggressive Fed amid inflation concerns. In April, the closely-watched 10-year Treasury yield rose above the key level of 3% for the first time since 2014.

Traders are paying close attention to the spread between the 2-year and 10-year yields. It narrowed to 40 bps, the tightest it’s been since 2007, in the minutes following the announcement. The curve spread has gone negative ahead of the last five US recessions. 

Here’s a look at the scoreboard as of 2:40 p.m. ET:

  • 2-year +5.1 bps @ 2.590%
  • 3-year +4.9 bps @ 2.721%
  • 5-year +4.8 bps @ 2.857%
  • 7-year +4.5 bps @ 2.957%
  • 10-year +3.5 bps @ 2.996% 
  • 30-year +2.0 bps @ 3.114% 

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