Treasury Yields Fall After Fed Decision -- Update
June 19 2019 - 9:43PM
Dow Jones News
By Sam Goldfarb
Ten-year Treasury yields fell below 2% for the first time since
late 2016, the latest milestone in this year's global government
bond rally that has sent yields in Europe to a series of record
lows.
After standing at 2.023% late in the New York day, gains in
Treasury prices continued as Asian trading started Thursday. The
yield, which moves inversely to prices, was recently at 1.993%,
according to FactSet. It topped out at 3.232% on Nov. 8.
U.S. government bond prices surged higher Wednesday afternoon
after the Federal Reserve held its benchmark interest rate steady
but opened the door to a near-term cut.
Yields slid immediately after the Fed released its policy
statement and continued declining as Fed Chairman Jerome Powell
spoke at a news conference.
Mr. Powell did little to alter the impression that the Fed was
prepared to cut interest rates for the first time in more than a
decade. Many investors had anticipated those signals, but they
still hadn't fully been reflected in bond prices.
Interest-rate forecasts released on Wednesday showed eight of 17
officials project the Fed will cut the benchmark federal-funds rate
this year, with seven of those officials seeing two quarter-point
reductions.
Fed officials in their policy statement made note of both
increased uncertainty about the economic outlook and muted
inflation pressures, while saying they would "act as appropriate to
sustain the expansion."
Such language helped push the yield on the benchmark 10-year
U.S. Treasury note to 2.023%, its lowest close since Nov. 8,
2016--the day of the last presidential election--from 2.060% on
Tuesday.
Yields on shorter-term bonds, which are particularly sensitive
to changes in monetary policy, logged bigger declines, with the
two-year yield dropping nearly 0.11 percentage point to 1.758%, its
lowest close since November 2017.
"Half the committee is ready to pull the trigger on a rate cut
at some point this year," said Thomas Simons, senior vice president
and money-market economist in the fixed-income group at Jefferies
LLC. "Powell's tone in his press conference to me suggested the
threshold for a rate cut is not particularly far away."
Already this year, investors had been scooping up Treasurys
largely in response to slowing global growth, soft inflation data
and trade tensions, which have clouded the economic outlook.
Previewing Mr. Powell's comments, European Central Bank
President Mario Draghi had signaled Tuesday that the ECB could
start rolling out new stimulus measures, including a reduction to
already negative interest rates.
Despite the momentum toward a rate cut, some analysts cautioned
that the Fed might keep rates steady if the U.S. and China make
progress on trade talks on the sidelines of next week's Group of 20
summit in Japan.
Such a scenario in turn could push Treasury yields higher.
The WSJ Dollar Index, which measures the U.S. currency against a
basket of 16 others, fell 0.4% to 90.40.
Write to Sam Goldfarb at sam.goldfarb@wsj.com
(END) Dow Jones Newswires
June 19, 2019 21:28 ET (01:28 GMT)
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