Treasury yields fell on Wednesday, as investors digested the Federal Reserve’s move to ease the pace of balance sheet reduction, and the central bank’s chairman Jerome Powell ruled out the possibility of a rate hike next month.
The yield on the 10-year Treasury dropped 5 basis points at 4.632%. The 2-year Treasury yield was down nearly 9 basis points at 4.96%.
Yields and prices move in opposite directions. One basis point equals to 0.01%.
The central bank said that beginning in June it will slow the pace at which it allows maturing bond proceeds to roll off its balance sheet without reinvesting them, a process known as quantitative tightening. QT was one way the Fed tightened monetary conditions after inflation surged.
“They are not cutting interest rates, but they are cutting QT. What? The bond market oughta love this,” Chris Rupkey, chief economist at FWDBONDS, said in a note. “Cutting QT means less new cash that the U.S. Treasury…
