Treasuries Close Sharply Higher Following Fed Announcement

(RTTNews) - Treasuries moved sharply higher during trading on Wednesday, extending the upward move seen over the two previous sessions.

Bond prices surged early in the session and remained firmly positive throughout the day. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, tumbled 9.2 basis points to 3.967 percent.

The ten-year yield closed lower for the fourth time in the past five sessions, ending the day at its lowest closing level in over two weeks.

The early rally by treasuries came after payroll processor ADP released a report showing private sector job growth in the U.S. slowed by more than expected in the month of January.

ADP said private sector employment rose by 107,000 jobs in January after climbing by a downwardly revised 158,000 jobs in December.

Economists had expected private sector employment to increase by 145,000 jobs compared to the addition of 164,000 jobs originally reported for the previous month.

The report also said year-over-year pay growth for job-stayers slowed to 5.2 percent in January from 5.4 percent in December. For job-changers, pay was up 7.2 percent, the smallest annual gain since May 2021.

Meanwhile, treasuries gave back ground immediately after the Federal Reserve's monetary policy announcement but moved back to the upside shortly afterward.

The Fed announced its widely expected decision to maintain the target range for the federal funds rate at 5.25 to 5.50 percent in support of its dual goals of maximum employment and inflation at the rate of 2 percent over the longer run.

The decision to leave rates unchanged came as the Fed acknowledged inflation has eased over the past year but said it remains elevated.

The central bank also described economic growth as solid while noting job gains have moderated since early last year but remain strong.

The Fed's statement notably removed the reference to "any additional policy firming that may be appropriate."

However, the Fed also said it does not expect it will be appropriate to lower rates until it has gained greater confidence that inflation is moving sustainably toward 2 percent.

Trading on Thursday may continue to be impacted by reaction to the Fed, while reports on weekly jobless claims, manufacturing activity and construction spending are also likely to attract attention.