FXStreet (Mumbai) – The yield on the short duration and long duration treasury yields in the US fell in a snap reaction to the downward revision of the GDP and 2016 median interest rate forecast in FOMC statement, only to recover partially on the possibility of two interest rate hikes in 2015.
The benchmark 10-year yield dropped from 2.403% to 2.32%, before moving higher to 2.351%. The 30-year yield fell from 3.14% to 3.075% before moving back to 3.11%.
At the short end of the curve, the 2-year yield, which mimics short-term interest rate expectations, fell sharply to 0.669% from 0.766%. The yield is struggling to take back its losses as it trades at 0.686%. Moreover, the 2-year yield is under pressure due to the downward revision of the end-2016 median interest rate forecast. The median estimate for the end of 2016 fell to 1.625%, compared with the 1.875% forecast in March.
The focus now shifts to Yellen’s press conference due in a few minutes. Investors will watch out for Yellen’s comments on the labor market, interest rate lift-off and economic growth and inflation.
(Market News Provided by FXstreet)