Treasury yields little changed as investors anticipate Fed's rate decision
U.S. Treasury yields were little changed on Wednesday as investors awaited the Federal Reserve's rate policy decision and more insights on the economic impact of President Donald Trump's tariffs and escalating tensions in the Middle East.
At 5:57 a.m. ET, the benchmark 10-year Treasury note fell one basis point to 4.381%, while the 2-year Treasury yield was lower by less than a basis point at 3.945%.
One basis point is equivalent to 0.01%, and yields and prices move in opposite directions.
The Fed's interest rate decision will be announced at 2 p.m. ET. Traders are pricing in a 99.9% chance that the central bank will hold interest rates steady, according to the CME FedWatch Tool. Federal Open Market Committee members forecast only two rate cuts this year.
"A lot has happened since their last meeting in early May, including the dialling back of China tariffs, the Moody's downgrade of the US credit rating, as well as the significant escalation in the Middle East," Deutsche Bank analysts said in a note. "So given that uncertainty and the potential for fresh inflationary spikes, they're widely expected to keep rates on hold again, and it means the focus will be on the dot plot for where they expect rates to go next."
They added, "Our US economists think it'll only signal one rate cut this year, which would be a hawkish shift from March, when they still signalled two cuts. However, they think it's a close call, and they expect the Fed to mostly maintain existing signals about policy."
Investors are also awaiting economic data, including housing starts for May and preliminary building permits. Weekly jobless claims will be released in the morning.
The bond market will be closed on Thursday for the Juneteenth holiday.
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