In the aftermath of Wednesday's market decline, treasuries experienced a robust rebound on Thursday. Bond prices exhibited significant gains during the morning and maintained their positive momentum into the afternoon. As a result, the yield on the benchmark ten-year note, which inversely correlates with its price, dropped by 8.5 basis points, settling at 4.341 percent.
This decrease followed a substantial surge on Wednesday, when the ten-year yield spiked by 13.7 basis points, marking its highest closing level in four months.
The initial boost in treasuries was largely driven by traders' anticipation of the Federal Reserve's monetary policy announcement scheduled for later in the day. The rally in treasuries persisted as the Fed confirmed its widely anticipated decision to reduce interest rates by a quarter point.
Following a more aggressive half-point rate cut in September, the Fed announced a new target range for the federal funds rate, lowering it by 25 basis points to 4.50 to 4.75 percent. The central bank cited easing labor market conditions and ongoing progress toward its 2 percent inflation target as the rationale behind the rate reduction.
However, the Fed emphasized that the risks to achieving its dual mandates—maximum employment and a stable 2 percent inflation rate—are currently balanced. "The economic outlook remains uncertain, and the Committee remains vigilant regarding the risks to both aspects of its dual mandate," the Fed's statement noted.
In contemplating future rate adjustments, the central bank highlighted its commitment to a thorough evaluation of incoming data, the evolving economic outlook, and the balance of potential risks.
Federal Reserve Chair Jerome Powell reiterated in his post-meeting press conference that interest rates would not follow a "preset course," underscoring that future policy decisions would be made on a "meeting by meeting" basis. Powell also expressed confidence in the Fed's ability to address risks related to its dual mandate, suggesting the flexibility to alter rates at varying paces in response to economic developments.
Simultaneously, Powell indicated that President Donald Trump's electoral victory wouldn't immediately influence policy decisions but acknowledged potential long-term economic implications from the administration's policies, which may need to be factored into future decisions.
Looking ahead, market activity on Friday could be swayed by responses to the University of Michigan's preliminary November report on consumer sentiment, which encompasses data on consumers' inflation expectations.
