U.S. Treasury yields were little changed Wednesday morning as investors awaited the outcome of the two-day Federal Reserve’s September meeting.
Benchmark at 4:30 a.m. ET 10 year treasury The yield remained unchanged at 5.004%, but the yield on long-term interest rates was 5.004%. 20- and 30 years US Treasuries remained unchanged at 5.409% and 5.372%, respectively.
One basis point equals 0.01%, and yields and prices move in opposite directions.
The Federal Reserve’s Federal Open Market Committee is scheduled to announce its latest monetary policy decision at 2pm ET on Wednesday.
Federal funds futures were last pricing in about a 92.5% chance of a quarter-point rate hike, up from 33% a month ago, according to the CME FedWatch tool.
The annual U.S. inflation rate reached 3.4% in August, and the latest consumer spending price index, which the Fed uses as its preferred forecasting tool, rose at an annual rate of 3.7% in July, according to data released Friday. Meanwhile, crude oil prices remain above $100 per barrel, raising concerns about inflation.
Hot inflation data have put pressure on long-term yields on the U.S. Treasury curve in recent weeks, with the 10-year Treasury yield rising to its highest level since 2007 on Tuesday.
Brent Willsey, chief investment officer at San Diego-based Willsey Asset Management, said in an email Wednesday that the Fed’s hold could have implications for investors and central banks.
“If the Fed leaves interest rates unchanged on Wednesday, there could be a surprise in stock prices. Surprises are rarely welcomed by the market,” he said. “It could also undermine the Fed’s credibility and reignite concerns that the Fed is bowing to political pressure to keep interest rates stable.”
The Trump administration has repeatedly put pressure on the Fed to lower interest rates.
Jonathan Pryor, co-head of foreign exchange dealing at Marex, said in a note Wednesday morning that the Fed is “moving to a new phase of monetary policy.”
“Earlier this year it looked like we were entering a rate-cutting cycle that could last six to 12 months, but now it feels like the tide has turned,” he said.
“At a time when global bond markets are in the spotlight, central banks are making smart decisions to tackle inflation, primarily supply-side inflation. It’s a difficult balance to strike, and markets are keenly aware of it.”
