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U.S. Treasury yields fell slightly early Wednesday as investors waited for the Federal Reserve’s policy decision which could provide details on how they foresee the U.S. economy will recover in the next few years.
What are Treasurys doing?
The 10-year Treasury note yield TMUBMUSD10Y, 0.665% was down 1.6 basis points to 0.663%, while the 2-year note TMUBMUSD02Y, 0.129% was virtually unchanged at 0.137%. The 30-year bond yield TMUBMUSD30Y, 1.408% fell 2 basis points to 1.410%. Bond prices move inversely to yields.
What’s driving Treasurys?
The Fed’s policy update later in the session will draw the attention of market participants who will look for clues on how the central bank’s average inflation targeting framework will be implemented in practice.
For the first time, the Fed will release its economic projections for 2023. Analysts expect the Fed’s “dot plot” to show that most officials think rates will remain near zero, signaling the central bank will keep monetary policy accommodative for the next few years.
Read: Fed to signal interest-rate hikes won’t be an issue until 2024
In economic data, U.S. retail sales rose 0.6% in August, slightly shy of the consensus estimate of 0.7%. Stripping out for auto sales, retail spending grew 0.7%.
What did market participants’ say?
“We expect the Fed to keep rates on hold well into 2022 as they delay tightening in order to achieve an inflation target above 2% which will steepen the curve,” said Tom di Galoma, managing director of Treasurys trading at Seaport Global Securities.
