Treasury yields end at one-week lows after Fed's policy update

By Vivien Lou Chen

Treasury yields finished mostly lower on Wednesday after Federal Reserve officials decided to keep three quarter-point rate cuts in play for this year.

What happened

The yield on the 2-year Treasury BX:TMUBMUSD02Y declined 8.8 basis points to 4.604%, from 4.692% on Tuesday. The yield on the 10-year Treasury BX:TMUBMUSD10Y fell 2.5 basis point to 4.271%, from 4.296% on Tuesday. Wednesday's levels are the lowest for the 2- and 10-year rates since March 12-13, based on 3 p.m. Eastern time figures from Dow Jones Market Data.The yield on the 30-year Treasury BX:TMUBMUSD30Y rose 1.4 basis points to 4.454%, from 4.440% on Tuesday.

What drove markets

As widely expected, the policy-setting Federal Open Market Committee left its main policy rate target unchanged at between 5.25% and 5.5%. In addition, officials said that any future adjustment in rates will depend on the data, the outlook and the balance of risks.

MarketWatch Live: Fed maintains forecast of three rate cuts in 2024

Meanwhile, policy makers left their median estimate for rates by year-end at a level that implies three quarter-point rate cuts for 2024. They indicated that they would not start to cut rates until they've gained greater confidence that inflation is moving sustainably toward 2%.

In his post-meeting press conference, Fed Chair Jerome Powell said it would likely be appropriate to "dial back" on policy restraint at some point, but acknowledged the risk that this could reverse some of the progress that's already been made on inflation. He also said that policy makers felt the need to slow the pace of decline in securities on the Fed's balance sheet "fairly soon."

What analysts are saying

"The Fed bowed to market expectations and left rates unchanged, while continuing to suggest 3 cuts in the updated dot plots," said portfolio manager Jeffrey A. Rosenkranz of Shelton Capital Management, based in Denver.

"We truly are in a meeting-to-meeting, data-dependent holding pattern," Rosenkranz wrote in an email to MarketWatch. "Because we believe economic activity will remain stronger than desirable in the coming months, this will push the Fed to wait longer on rate cuts and move more slowly once they do begin."

Premature rate cuts run the risk that the FOMC "would need to get more aggressive in the future," the portfolio manager wrote. The Fed is in the unenviable position of balancing the risks of "crashing the economy versus allowing inflation to become entrenched."

-Vivien Lou Chen

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

03-20-24 1537ET

Copyright (c) 2024 Dow Jones & Company, Inc.