2-year Treasury yield rises after Fed raises rates by half a point, indicates more hikes

The yield on the 2-year Treasury rose Wednesday after the Federal Reserve delivered a widely expected 50 basis point rate hike and indicated that it will continue raising rates to tame inflation.

The 2-year Treasury yield last traded at 4.226%, while the yield on the benchmark 10-year Treasury note last dipped about a basis point to 3.496%, while the Yields and prices have an inverted relationship. One basis point equals 0.01%.

While the hike marked a step down from the central bank’s previous four increases, the Fed indicated that it will keep rates higher through next year, and hold off on cuts until 2024. The central bank also said it expects to raise its “terminal rate” to 5.1% before the hiking cycle concludes.

Bond yields fluctuated throughout Fed Chair Jerome Powell’s press conference, as he indicated more rate hikes are likely to come before the central bank shifts gears on inflation.

“The inflation data received so far for October and November show a welcome reduction in the monthly pace of price increases. But it will take substantially more evidence to give confidence that inflation is on a sustained downward path,” Powell wrote.

Wednesday’s moves come after November consumer price index data released indicated that inflationary pressures are easing. Prices rose by 0.1% in November from October and by 7.1% on a yearly basis. Both figures came in lower than economists surveyed by Dow Jones had expected.

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