Bond Report: 2-year Treasury yield extends climb, lingering at decadelong high

U.S. government bond yields continued their ascent Thursday even after the Federal Reserve made few changes to its policy statement.

The 10-year Treasury note yield TMUBMUSD10Y, +0.20% was up 1.7 basis points to 3.232%, and the two-year note yield TMUBMUSD02Y, +0.84% rose 2.1 basis points to 2.969%, hovering at a decadelong high. The yield for the 30-year bond TMUBMUSD30Y, +0.17% or the long bond, was mostly unchanged at 3.425%, around more-than-a-four-year high. Bond prices move in the opposite direction of yields.

As expected, the Fed meeting largely left the central bank’s policy statement unchanged, and kept rates steady between a range of 2.00% to 2.25%, leaving investors to wait for the next expected rate increase in December.

“In short, the tone did not change significantly, with the key forward-looking parts identical to before. Officials are implicitly endorsing the high probability of another rate hike in December being priced into markets,” wrote Jim O’ Sullivan, chief U.S. economist for High Frequency Economics.

The Fed reiterated its positive outlook on the economy, but made a nod to the deteriorating business climate after it said investment spending had cooled down. This came after an otherwise healthy reading of third-quarter GDP revealed some weakness in business investment, mostly attributed to tariff-related issues.

Investors were disappointed by an absence of details on when the Fed’s balance-sheet reduction will come to a halt. An earlier end to the central bank’s gradual reduction of its portfolio could help contain the recent climb in long-dated yields. The balance sheet now stands at $4.1 trillion, from a high of $4.5 trillion.

The paucity of information will push traders to watch for a raft of speeches by members of the Federal Open Market Committee, including New York Fed President John Williams and Philadelphia Fed President Patrick Harker, on Friday.

See: Fed to remain stoic in face of market gyrations

On the data front, jobless claims for the seven days ending in Nov. 3 came in at 214,000. Economists polled by MarketWatch expect a reading of 210,000, down from 214,000 in the previous period.

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