FX.co ★ Treasuries Move Sharply Higher Following Fed Announcement

Following the steep plummet previously observed, the treasury market showed a significant rebound during Wednesday's trading.

The value of bonds demonstrated a mild uptick for the majority of the day, with a more pronounced rally occurring towards the end of trading. This caused the yield on the ten-year benchmark note, which inversely correlates with the price, to decrease by 9.1 basis points to 4.595 percent.

The uplift in the treasury market occurred in response to the Federal Reserve's anticipated decision to maintain constant interest rates. A lack of measurable progress towards its target of 2 percent inflation in recent times was cited by the Fed as the reason for maintaining the federal funds rate between 5.25 to 5.50 percent.

The members of the Fed emphasized their need for more definite assurance that the inflation is moving sustainably towards 2 percent before contemplating a reduction in interest rates.

In the meantime, the Fed announced plans to continue cutting back its assets of Treasury securities, agency debt, and agency mortgage-backed securities, but revealed a plan to decrease the pace of this reduction.

It stated that the reduction in its securities holdings would decelerate by dropping the monthly redemption cap on Treasury securities from $60 billion to $25 billion. The monthly redemption cap for agency debt and agency mortgage-backed securities will remain at $35 billion. Any principal payments surpassing this cap will be re-invested into Treasury securities.

The next monetary policy meeting hosted by the central bank is scheduled for June 11-12. It is expected that they will once again choose to keep rates steady.

Further gains in Treasuries occurred as the Federal Reserve Chair, Powell, indicated during his post-meeting press conference that the bank's next policy rate is unlikely to be a hike.

Trade on Thursday may be influenced by reactions to the Federal Reserve announcement. In addition, reports on weekly jobless claims, the U.S. trade deficit, and labor productivity and costs could also garner attention.