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Treasury Yields Lower Ahead of Expected Fed Rate Hike

*** ONE-TIME USE *** The U.S. Treasury Department building is seen in Washington, D.C., Jan. 19, 2023.

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Saul Loeb/AFP/Getty Images

Treasury yields were lower on Wednesday morning ahead of what’s widely expected to be another short-term rate increase by the Federal Reserve later in the day.

The 10-year U.S. Treasury Note was yielding 3.49%, down from its close Tuesday at 3.527%.

The yield’s still above its lowest close this year of 3.374% on Jan. 18.

Treasury yields have been moving sharply lower since last fall, a sign that bond investors believe that inflation is moving in the right direction, and that the Fed is getting closer to finishing its rate hikes. Bond yields and prices move inversely.

The Fed boosted short-term rates seven times in 2022 to a recent target range of 4.25% to 4.5% from around zero. The 10-year Treasury’s yield hit its 52-week high of 4.23% on Oct. 24.

The Fed is expected to announce its latest policy move at 2 p.m. eastern time on Wednesday. The futures market is putting the odds of a 25 basis point, or 0.25 percentage point, increase at nearly 100%.

One possible bullish sign for bond investors is that the latest ADP U.S. employment survey showed that the private sector added 106,000 jobs in January, below FactSet’s consensus estimate of 170,000.

The market will be paying close attention to Fed Chairman Jerome Powell’s comments following the announcement on rate policy. He has taken a hawkish tone, saying that while inflation has moved in the right direction, there’s still more work to be done. The Fed’s long-term inflation target is 2%.

Core CPI, which excludes food and energy, rose at an annual rate of 5.7% in December, down from the previous month’s 6%, and in line with FactSet’s consensus estimate.

In an email on Monday, Pimco economists Tiffany Wilding and Allison Boxer said they expect a 25 basis-point increase along with “modestly dovish statement changes, and a relatively hawkish press conference from Chair Powell.”

Write to Lawrence C. Strauss at


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