U.S. Treasury yields rose on Wednesday, briefly extending earlier gains after the Federal Reserve left interest rates on hold as widely expected, noting that inflation remains high and the labor market remains stable.
After two days of meetings, the Federal Reserve kept interest rates unchanged at a range of 3.50% to 3.75%. “Job growth remains low,” the Fed said in a statement, removing language from earlier statements that downside risks to employment have increased.
This suggests that Fed policymakers are less concerned about the deterioration of the labor market.
Christopher Waller, the candidate to replace Fed Chairman Jerome Powell, whose term as head of the central bank expires in May, and Governor Stephen Milan, who is on leave as White House economic adviser, both voted against cutting rates by a quarter of a percentage point.
Following the Fed’s decision, the benchmark 10-year Treasury yield rose 4.2 basis points to 4.265%. The yield on the US 30-year bond also rose, rising 4.2 basis points to 4.877%.
The yield on US two-year bonds, which reflects interest rate expectations, rose 2.5 basis points to 3.594%. Before the Fed statement was released, it was 2.587%.
“With a strong job market and persistent inflation, the Fed has been waiting to see how previous rate cuts will support U.S. economic growth,” said Matthias Scheiber, head of the multi-asset team at Allspring Global Investments in London.
He added that the announcement of a new Fed chair will be a big focus, noting that the race is “wide open” although the general expectation is that a more dovish figure will replace Powell.
Following the Fed’s statement, U.S. interest rate futures markets are pricing in 2026 easing of about 46 bps, or less than two 25 basis point cuts. This is down from about 53 bps two weeks ago.
(Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by Chuck Mikolajczak; Editing by Diane Craft)
