The 10-year Treasury yield inched lower Wednesday after briefly topping the 4% mark as investors bet that perhaps the Federal Reserve wouldn’t cut rates as aggressively as hoped for this year.
The 10-year Treasury yield was last down more than three basis points to 3.911, after touching above the key 4% mark earlier in the morning. The 2-year Treasury yield was last trading at 4.333% after gaining half a basis point. Yields and prices have an inverted relationship and one basis point equals 0.01%.
The 10-year Treasury yield was in a steep downtrend to end 2023 since spooking investors by rising above 5% in October. The 10-year yield closed out last year at around 3.83%. The downturn helped fuel a year-end rally in stocks.
10-year Treasury yield, 6 months
But that has reversed this year with investors questioning whether the market is getting too optimistic about how aggressively the Fed may cut rates this year. The Fed changed its hawkish tune mid-December, forecasting three rate cuts in 2024. Traders began betting the Fed would be even more aggressive than that and also move to lower rates pretty soon into the new year.
Richmond Federal Reserve President Thomas Barkin on Wednesday noted that interest rate hikes were still “on the table” even though the Fed is making “real progress” on inflation.
Minutes from that Fed’s December meeting released Wednesday indicated that many officials seemed satisfied with the recent progress made on the inflation front, and deem cuts appropriate at some point in 2024. However, the minutes also suggested that the Fed intends to maintain a restrictive stance in the short-term as uncertainties linger.
“Participants generally stressed the importance of maintaining a careful and data-dependent approach to making monetary policy decisions and reaffirmed that it would be appropriate for policy to remain at a restrictive stance for some time until inflation was clearly moving down sustainably toward the…
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