U.S. Treasury Yields Fall After Fed Decision

U.S. government-bond prices held gains Wednesday after the Federal Reserve left eft its benchmark interest rate unchanged at the conclusion of its two-day policy meeting.

In recent trading, the yield on the benchmark 10-year U.S. Treasury note was 1.617%, according to Tradeweb, essentially unchanged from just before the Fed’s policy statement but down from 1.642% Tuesday.

Yields, which fall when bond prices rise, have declined in recent days in response to speculation that China’s coronavirus outbreak could hurt the global economy and push the Fed to lower short-term interest rates.

Expectations for lower interest rates set by the Fed tend to increase demand for shorter-term Treasurys.


leah millis/Reuters

Though the Fed was expected to keep rates unchanged Wednesday, federal-funds futures—which investors use to bet on the path of central-bank policy—showed earlier in the day that investors thought there was a 57% chance that the Fed will cut rates by the end of its September meeting, according to CME Group data. That was up from 46% a week ago and 38% a month ago.

Expectations for lower interest rates set by the Fed tend to increase demand for shorter-term Treasurys by making their yields look more attractive by comparison. Growth fears, meanwhile, also boost longer-term Treasurys by increasing the appeal of safer assets and lowering expectations for inflation.

In recent trading, the yield on the two-year Treasury note was 1.445%. That was down from 1.457% Tuesday and 1.569% on Jan. 17, the last trading session before Chinese health officials said the coronavirus was spreading among humans.

As if midnight Tuesday, the virus had killed more than 130 people while infecting more than 6,000, most of them in China. On Wednesday,

British Airways

said it was canceling all flights to mainland China, while

American Airlines

said it would suspend flights from Los Angeles to Shanghai and Beijing.

The Fed cut rates three times last year, lowering their benchmark federal-funds rate to a range between 1.5% and 1.75%, after raising it four times in 2018.

Write to Sam Goldfarb at sam.goldfarb@wsj.com

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