FX.co ★ US 10 Year Treasury Yield Rises Sharply

The yield on the 10-year U.S. Treasury note surged by nearly 10 basis points to 4.06% after Federal Reserve Chairman Powell tempered expectations of further rate cuts this year. As anticipated, the Federal Reserve reduced its rates by 25 basis points in its October meeting and announced the conclusion of its quantitative tightening measures. Nonetheless, yields across the yield curve increased following Powell's indication of hesitance to commit to additional cuts, which tempered the market's belief that the Fed would continue to prioritize labor market challenges over persistent inflation. Concurrently, the Fed plans to conclude its balance sheet runoff at the beginning of December. It will roll over all maturing Treasury securities and reinvest its Mortgage-Backed Securities (MBS) into Treasury bills. This strategy aims to alleviate recent pressures in the overnight funding markets. Rate futures analysts persist in anticipating three additional rate cuts by July of next year. Previously, concerns about a slowing economy, the government shutdown, and expectations of the Fed maintaining a steady balance sheet had driven the 10-year yield to a one-year low of 3.95% on October 22nd.