As investors process the Fed's rate hike, Treasury yields increase.
On Thursday, U.S. Treasury yields increased as investors processed the Federal Reserve's decision to raise interest rates after a three-year hiatus.
The benchmark yield increased by 1 basis point, from 2.201% to 2.489%, while yields move inversely to prices, meaning that a 1 basis point increase is equivalent to a 0.01% decrease in price.
On Wednesday, the Fed raised its benchmark interest rate by a quarter of a percentage point, marking its first increase since 2018.
The FOMC has planned six additional rate hikes and anticipates a reduction of its $9 trillion balance sheet in 2022.
Jerome Powell, the Fed Chairman, suggested at his post-meeting news conference that the balance sheet reduction may begin in May, and stated that it could have the same impact as another rate hike this year.
The FOMC members raised their inflation expectations and predicted that the personal consumption expenditures price index excluding food and energy will increase by 4.1% this year, compared to the previously forecasted 2.7% growth in December 2021.
On Wednesday, Charles Hepworth, investment director at GAM Investments, stated that the Fed's need to appear hawkish due to high inflation is clear, but if the committee had acted sooner, they wouldn't have needed to act as aggressively now.
He stated that the projected trajectory will not be delivered on due to the slowing economy and worsening financial conditions.
The 10-year Treasury yield reached its highest point since 2019 at 2.24%, but subsequently decreased.
Reports of cease-fire progress on Wednesday and the approval of additional weapons for Ukraine by U.S. President Joe Biden continue to keep Russia's invasion of Ukraine in the spotlight for investors.
Last week, the number of jobless claims filed was 214,000, which was lower than the estimated 220,000 by the Dow Jones and a decrease from the previous week's 15,000.
While housing starts and building permits slightly exceeded their respective estimates, the overall economic news remains positive.
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