Treasuries Move Sharply Higher Following Fed Announcement

(RTTNews) - Following the sharp pullback seen in the previous session, treasuries showed a strong move back to the upside during trading on Wednesday.

Bond prices saw modest strength for much of the day before rallying late in the session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, tumbled 9.1 basis points to 4.595 percent.

The late-day rally by treasuries came after the Federal Reserve on Wednesday announced its widely expected decision to leave interest rates unchanged.

Citing a lack of further progress toward its 2 percent inflation objective in recent months, the Fed said it decided to maintain the target range for the federal funds rate at 5.25 to 5.50 percent

Members of the Fed also reiterated they need "greater confidence" inflation is moving sustainably toward 2 percent before they consider cutting interest rates.

Meanwhile, the Fed said it would continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities but revealed plans to slow the pace of decline.

The central bank said would slow the pace of decline of its securities holdings by reducing the monthly redemption cap on Treasury securities from $60 billion to $25 billion.

The monthly redemption cap on agency debt and agency mortgage-backed securities will be maintained at $35 billion, and the Fed will reinvest any principal payments in excess of this cap into Treasury securities.

The Fed's next monetary policy meeting is scheduled for June 11-12, with the central bank likely to leave rates unchanged once again.

Treasuries saw further upside as Fed Chair Powell said during his post-meeting press conference that the central bank's next policy rate is unlikely to be a hike.

Trading on Thursday may continue to be impacted by reaction to the Fed announcement, while reports on weekly jobless claims, the U.S. trade deficit and labor productivity and costs may also attract attention.