By Min Zeng
U.S. Treasury bonds rose on Wednesday after the Federal Reserve
said it would be patient about raising interest rates.
The comments came from an interest-rate statement following the
Fed's two-day policy meeting. The Fed said the U.S. economy was
expanding at a solid pace, but it signaled that short-term interest
rates were likely to remain near zero at least until midyear.
"The bond market welcomed the Fed's re-assertion that they
remain patient and a rate increase is still months away," said
Christopher Sullivan, who oversees $2.45 billion as chief
investment officer at the United Nations Federal Credit Union in
New York.
In recent trading, the yield on the benchmark 10-year Treasury
note was 1.763%, compared with 1.78% right before the Fed's
release, according to Tradeweb. The yield was 1.825% on Tuesday.
Bond prices rise as their yields fall.
Fed-funds futures, which are used to place bets on central-bank
policy, showed Wednesday that investors and traders see a 15%
likelihood of a rate increase at the June Fed policy meeting,
according to data from CME Group Inc. It was 18% before the Fed
statement. The odds were 26% a month ago.
Bond prices had strengthened earlier Wednesday as growing market
turmoil in Greece boosted demand for haven assets.
A $26 billion sale of two-year Treasury notes on Wednesday drew
the strongest demand since December 2013, a sign buyers expect the
Fed will be slow in shifting to a tighter monetary policy. Higher
interest rates from the central bank will erode the value of
outstanding bonds.
The 10-year yield traded near a 20-month low. It has fallen from
2.173% at the end of 2014.
-- Write to Min Zeng at min.zeng@wsj.com