Treasury yields slipped Wednesday morning alongside oil prices as traders eyed the Federal Reserve’s policy announcement later in the session.
What’s happening
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The yield on the 2-year Treasury
BX:TMUBMUSD02Y
slipped by 5.1 basis points to 5.058% from 5.109% on Tuesday. Tuesday’s level was the highest since July 25, 2006, based on 3 p.m. Eastern time figures from Dow Jones Market Data. -
The yield on the 10-year Treasury
BX:TMUBMUSD10Y
retreated 3.7 basis points to 4.329% from 4.366% on Tuesday. Tuesday’s level was the highest for the 10-year rate since Oct. 31, 2007. -
The yield on the 30-year Treasury
BX:TMUBMUSD30Y
fell 2.7 basis points to 4.401% from 4.428%. Tuesday’s level was the highest since Aug. 21.
What’s driving markets
Treasury yields were lower Wednesday morning as oil prices
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slipped from their 10-month highs.
The 2- and 10-year yields were still not far from their highest closing levels since 2006-2007 as investors await the Federal Reserve’s policy decision, economic projections, and interest-rate forecasts due at 2 p.m. Eastern time. Fed Chair Jerome Powell will hold a press conference, starting at 2:30 p.m.
Markets are pricing in a 99% probability that the Fed will leave interest rates unchanged at a range of 5.25%-5.5%, according to the CME FedWatch Tool. The chance of a 25-basis-point rate hike to a range of 5.5%-5.75% at the subsequent meeting in November is priced at 28.8%.
In the U.K. the 2-year government bond yield
BX:TMBMKGB-02Y
fell 10 basis points to 4.625% after data showed consumer prices surprisingly slipping to 6.7% year-over-year in August, down from 6.8% in July and below economists expectations of 7%.
What analysts are saying
“While the FOMC may deliver another hike later this year — our base case scenario — the Fed is largely done,” said BofA Securities rates strategist Ralph Axel.
“The new driver of 10y rates in our view is the market pricing of cuts,” Axel wrote in a note. “Most of the cuts the market price come in 2024, but the cutting path extends through 2026. At the moment, about 88bp of cuts are priced into 2024, using the difference in Dec 2023 and Dec 2024 FOMC OIS (overnight index) swaps.”
This story originally appeared on Marketwatch
