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US Treasury yields rise ahead of Fed interest rate decision; 10-year yield tops 5%
US Treasury yields rose ahead of the Fed's interest rate decision, with the 10-year yield crossing 5% as investors awaited key US inflation and growth data.
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US Treasury yields rose on Wednesday as investors waited for the Federal Reserve’s latest decision on interest rates, which was expected later in the day. Investors were looking for clues about what the Fed might do with interest rates in the coming months.
The yield on the 10-year US Treasury note rose by more than 2 basis points to 5.0134%, crossing the 5% mark. This yield is closely watched because it influences borrowing costs for mortgages, car loans and credit card debt, CNBC reported.
2-year and 30-year US Treasury yields rise
The 2-year Treasury yield also moved higher, rising by 1 basis point to 4.7494%. This yield is more closely linked to expectations about the Federal Reserve’s short-term interest rate decisions.
The 30-year US Treasury yield also increased, rising by more than 1 basis point to 5.3200%. Yields on longer-term Treasury bonds can also react to geopolitical events and other factors that affect investors’ expectations, CNBC reported.
Fed interest rate decision in focus
Investors largely expected the Fed to keep interest rates unchanged. Traders expected a 90.6% chance that the Federal Reserve would keep interest rates unchanged at 3.75% to 4%, according to the CME FedWatch Tool. The Federal Open Market Committee (FOMC), which sets US interest rates, was expected to make this decision.
Investors were also watching for signs of what the Fed might do with interest rates next. Traders were pricing in a 76.5% chance of a 25-basis-point rate hike at the central bank’s next meeting on December 9.
Kevin Warsh's comments draw attention
Investors will watch Fed Chairman Kevin Warsh’s statement after the decision. His comments could provide clues about the central bank’s future plans for interest rates and its view of the US economy, CNBC reported.
Economic data due on Thursday could provide more clues about inflation. Investors will look at the Personal Consumption Expenditures (PCE) price index, which is the Federal Reserve’s preferred measure of inflation.
GDP, income and spending data awaited
The US economic growth figures will also be in focus. The quarterly gross domestic product (GDP) growth rate will help investors assess how quickly the economy is growing.
Personal income and spending data are also due on Thursday. These figures could help investors understand how much money Americans are earning and spending, offering more information about the strength of the US economy and inflation, according to CNBC.
A basis point is equal to 0.01 percentage point. For example, a rise of 2 basis points means a yield has increased by 0.02 percentage point. Treasury bond prices and yields generally move in opposite directions, meaning bond prices fall when yields rise, and vice versa.
