BOND REPORT: Treasury Yields Turn Lower After Fed Policy Update Seen As Opening Door To Rate Cuts
20 June 2019 - 4:39AM
Dow Jones News
By Sunny Oh
U.S. Treasury yields traded lower on Wednesday after the policy
statement from the Federal Reserve's two-day meeting suggested the
central bank could cut interest rates later this year.
What are Treasurys doing?
The 10-year Treasury note yield fell 0.5 basis point to 2.053%,
while the 2-year note yield, sensitive to shifting expectations for
Fed policy, slumped 4.7 basis points to 1.815%. The 30-year bond
rate was virtually unchanged at 2.552%. Debt prices move in the
opposite direction of yields.
What's driving Treasurys?
The Fed took out the phrase "patience" from its policy
statement, adding that uncertainties around the economic outlook
had picked up. As expected, the central bank left its federal funds
rate unchanged at a range between 2.25% to 2.50%.
The Fed's federal funds interest-rate projections, or the "dot
plot", indicated the central bank's rate-setting committee was
split between the options of standing pat or easing policy. Seven
members forecasted two rate cuts by the end of 2019.
Investors will now await the press conference held by Fed
Chairman Jerome Powell. The Fed has been under immense pressure to
ease policy even as some say economic data has yet to point to an
imminent recession. Short-term rates and fed fund futures have
priced in more than one cut before the end of this year.
President Donald Trump has repeatedly
(http://www.marketwatch.com/story/trump-on-feds-powell-i-disagree-with-him-entirely-2019-06-16)
called for Powell to cut rates, with a report suggesting that the
White House contemplated demoting
(http://www.marketwatch.com/story/white-house-explored-legality-of-demoting-powell-from-chairman-report-says-2019-06-18)
the current Fed Chairman.
Fed decision and Powell press conference:marketwatch
calendar
Read: Fed finds itself in a 'tough spot' as 10-year Treasury
yield slides to 21-month low
(http://www.marketwatch.com/story/fed-finds-itself-in-a-tough-spot-as-10-year-treasury-yield-slides-to-21-month-low-2019-06-18)
What did market participants say?
"You have to see what Powell is saying. He will do what it takes
to keep the expansion running," David Norris, head of U.S. credit
at TwentyFour Asset Management, told MarketWatch.
"The statement allows [the Fed] to retreat if anything at the
G-20 or elsewhere changes the climate between now and end of next
month but also recognizes the shift in inflation pressures away
from transitory to something more. No patience here, no pause
unless events warrant," wrote Jim Vogel, an interest-rate
strategist at FTN Financial.
(END) Dow Jones Newswires
June 19, 2019 14:24 ET (18:24 GMT)
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