The US Treasury’s 10-year yield reached 1.74% on Thursday morning, despite assurances from the Federal Reserve that it does not intend to raise interest rates soon or reduce its bond-buying program.
The yield on the 10-year Treasury benchmark reduced some gains to 1.722% by 5:15 am ET. The yield on the 30-year treasury bond was 2.483%. Yields move in the opposite direction to prices.
Following the Fed’s two-day policy meeting on Wednesday, the central bank said it sees stronger-than-expected economic growth, forecasting gross domestic product to rise to 6.5% in 2021. This is up from GDP growth of 4.2% projected in December.
The Fed also expected core inflation to reach 2.2% this year, but long-term expectations will remain around 2%.
The US central bank has also indicated that it does not intend to raise interest rates until 2023 and that it will continue its bond purchase program of at least $ 120 billion a month.
Fed Chairman Jerome Powell reiterated that the central bank wants to see inflation steadily above its 2% target and significant improvement in the US labor market, before considering rate changes or monthly bond purchases.
Quilter Investors portfolio manager Hinesh Patel said on Wednesday that following the Fed’s policy decision, “although no response at this time is undoubtedly the only move offered, whatever Powell does at this time, the Fed will leads bond markets to the danger zone. “
“If they do nothing, the bond market will continue to increase yields further, with the Fed looking to increase or adjust bond purchases, while if it acts now, it will be accused of overestimating and operating too hot,” he said. explained the.
However, Willem Sels, chief investment officer for private banking and wealth management at HSBC, said the Fed’s message of a gradual normalization of policy meant that this was a “very different situation than in 2013, when reducing bonds surprised the market by surprise, driving real returns for rapid and significant growth, causing the sale of stocks, gold and risky assets. “
There have been some concerns that the recent rise in bond yields and inflation expectations could mean a repeat of the “taper tantrum” of 2013. This was a time when Treasury yields rose sharply due to market panic after the Fed has stated that it intends to start reducing its quantitative easing program.
On Thursday, the weekly data on complaints for the unemployed will be sent at 8:30 AM ET.
Auctions are set to take place on Thursday for $ 40 billion in four-week bills, $ 40 billion in eight-week bills and $ 13 billion in 10-year, 10-year Treasury inflation-protected securities.
– CNBC’s Thomas Franck contributed to this report.