US Treasuries yields sank on Wednesday, with short-dated note yields posting their biggest daily declines in six years, after investors interpreted the latest Federal Reserve statement and comments from Fed Chair Janet Yellen as dovish.
While the Fed moved a step closer to a much-anticipated first rate hike since 2006 by removing "patient" from its language after its latest two-day policy meeting, the central bank said a rate increase remained "unlikely" at its April meeting and its latest forecasts revealed a more cautious view of the economic outlook.
The Fed's quarterly summary of economic projections cut its inflation outlook for 2015 and dramatically lowered its projected interest rate path, data known as the Fed's "dot plots."
"The market was expecting a dovish outcome, but this was more (dovish) than the market expected," said Priya Misra, head of US rates strategy at Bank of America Merrill Lynch in New York.
Yields on US two- and three-year notes, which are among those most vulnerable to a Fed rate hike, posted their biggest one-day declines since mid-March of 2009 and hit their lowest levels since Feb. 6 at 0.532 percent and 0.894 percent, respectively.
Benchmark 10-year Treasury yields hit their lowest since Feb. 9 of 1.91 percent and marked their biggest one-day yield decline since mid-September of 2013. US 30-year yields, which had slipped before the Fed statement on signs of low inflation, also fell to their lowest level since Feb. 9 of 2.5 percent to notch their biggest daily decline since April 2013. In addition to the shorter-dated notes, yields on Treasuries maturing in five and seven years also hit their lowest levels since Feb. 6 at 1.37 percent and 1.69 percent, respectively.
Benchmark 10-year notes were last up 1-9/32 in price to yield 1.92 percent, from a yield of 2.06 percent late Tuesday. US 30-year bonds were last up 2-10/32 in price to yield 2.5 percent, from a yield of 2.62 percent late Tuesday. Two-year notes were last up 7/32 in price to yield 0.56 percent, from a yield of 0.67 percent late Tuesday.
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