(RTTNews) – After showing a lack of direction throughout much of the session on Wednesday, treasuries came under pressure in the latter part of the trading day.
Bond prices showed a notable move to the downside in the final half-hour of trading, closing firmly negative. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, jumped 5.0 basis points to 4.076 percent.
The late-day weakness among treasuries came following the Federal Reserve’s widely expected announcement of its decision to lower interest rates by a quarter point.
The Fed said it decided to lower the target range for the federal funds rate by 25 basis points to 4.0 percent to 4.25 percent, citing a shift in the balance of risks.
The latest projections from Fed officials also suggest they expect the central bank to lower rates two more times this year, with rates forecast in a range of 3.50 percent to 3.75 percent by the end of 2025.
Bond traders may have been disappointed that Fed officials don’t appear eager to cut interest aggressively, with only newly sworn in Fed Governor Stephen I. Miran preferring to lower rates by half a point at the latest meeting.
“The strong vote for the 25-basis-point cut suggests that members, while acknowledging that downside risks to the job market have increased, are not panicking about the state of the economy,” said Mortgage Bankers Association SVP and Chief Economist Mike Fratantoni.
The latest forecasts also suggest Fed officials currently only expect one rate cut next year, although there were significant differences of opinion on the outlook.
The central bank’s next monetary policy meeting is scheduled for October 28-29, with CME Group’s FedWatch tool currently indicating an 89.1 percent chance the Fed will lower rates by another quarter point.
Trading on Thursday may continue to be impacted by reaction to the Fed announcement, while reports on initial jobless claims and leading economic indicators are also likely to attract attention.
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