FX.co ★ US 10-Year Yield Extends Surge

On Thursday, the yield on the 10-year US Treasury note surpassed 4.1%, advancing by 14 basis points over the past two sessions, driven by hawkish indications from the Federal Open Market Committee (FOMC). The Federal Reserve proceeded with a 25 basis point rate reduction as anticipated, yet Chairman Powell tempered expectations for a subsequent rate cut in December, signaling concerns among policymakers regarding core inflation's persistence above the 3% threshold. This sentiment was echoed by Kansas City Fed's Schmid, who dissented by advocating for holding rates steady. Additionally, the Fed announced that its balance sheet reduction would conclude at the start of December. The central bank plans to roll over all maturing Treasury securities and reinvest its Mortgage-Backed Securities (MBS) holdings into Treasury bills, aiming to alleviate recent pressures observed in overnight funding markets. Despite these developments, rate futures still project three more rate reductions by July of the following year. Earlier worries about an economic slowdown, a possible US government shutdown, and expectations of the Fed maintaining a stable balance sheet had pushed the 10-year yield to a one-year low of 3.95% on October 22nd.