Treasuries moved notably lower during trading on Wednesday, ending the day firmly in the red following the Federal Reserve’s monetary policy announcement.
After seeing early weakness, treasuries saw further downside on the heels of the release of the Fed statement. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, climbed 6.4 basis points to 2.092 percent.
The weakness among treasuries came as the Fed’s statement was interpreted as suggesting that a December rate hike remains on the table.
Following a two-day meeting, the Fed left interest rates unchanged as expected and reiterated its assessment that economic activity has been expanding at a moderate pace.
Many analysts pointed to the fact that the central bank removed a reference to global economic and financial developments potentially restraining economic activity.
The Fed’s explicit indication that it will assess progress towards its objectives of maximum employment and 2 percent inflation in determining whether it will be appropriate to raise rate at its “next meeting” was also highlighted.
“The post-FOMC meeting statement released today certainly leaves open the possibility that the Fed will hike interest rates at the next meeting in December,” said Paul Ashworth, Chief U.S. Economist at Capital Economics. “Nevertheless, we still think that the Fed is more likely to wait until early next year.”
The Fed statement overshadowed the release of results of the Treasury Department’s auction of $35 billion worth of five-year notes.
The five-year note auction drew a high yield of 1.415 percent and a bid-to-cover ratio of 2.43, while the ten previous five-year note auctions had an average bid-to-cover ratio of 2.47.
The bid-to-cover ratio is a measure of demand that indicates the amount of bids for each dollar worth of securities being sold.
The Treasury is due to finish off this week’s series of long-term securities auctions with the sale of $29 worth of seven-year notes on Thursday.
Trading on Thursday may also continue to be impacted by reaction to the Fed statement as well as reports on third quarter GDP, pending home sales, and weekly jobless claims.
The material has been provided by InstaForex Company – www.instaforex.com