U.S. Treasury yields were higher on Thursday as investors digested the Federal Reserve’s decision to cut interest rates by 50 basis points on Wednesday.
At 2:49 a.m. ET, the yield on the 10-year Treasury was up by over one basis point to 3.7018%. The 2-year Treasury yield was last less than one basis point higher to 3.6127%.
Yields and prices have an inverted relationship. One basis point equals 0.01%.
The Federal Reserve on Wednesday delivered a 50 basis point interest rate reduction, bringing the federal funds rate to 4.75%-5%. The size of the cut was in line with market expectations, which had shifted from expecting a 25 basis point cut to a bigger 50 basis point one in recent days.
It’s the first rate cut from the Fed since it began hiking rates in March 2022, marking a shift in its monetary policy approach since then.
“The Committee has gained greater confidence that inflation is moving sustainably toward 2 percent, and judges that the risks to achieving its employment and inflation goals are roughly in balance,” the Fed’s post-meeting statement said.
The central bank’s Federal Open Market Committee also indicated through its “dot plot” that it is anticipating another 50 basis points worth of cuts by the end of 2024. It also suggested another full percentage point in cuts by the end of 2025, and a half point in 2026.
Elsewhere, the Bank of England is set to announce its latest interest rate decision. It is widely expected to hold rates steady after cutting rates for the first time in over four years in August.
Back in the U.S., investors will also be looking out for August’s existing home sales data and the latest weekly initial jobless claims figures.