Treasuries remained lower as the Federal Reserve suggested the U.S. economy is strengthening enough for policy makers to begin raising interest rates before the end of the year.
Yields on benchmark 10-year notes rose after Fed officials raised their assessment of the labor market and the economy, keeping the central bank on track to raise interest rates this year for the first time in almost a decade.
“The backdrop arguably has gotten a little more consistent with the Fed being able hike in a somewhat normal course,” William Marshall, an interest-rate strategist at Credit Suisse Group AG in New York, one of 22 primary dealers that trade with the Fed, said before the release of the Fed’s policy statement.
Ten-year note yields rose five basis points to 2.36 percent as of 2:02 p.m. in New York, according to Bloomberg Bond Trader data.
Federal Reserve officials maintained their forecast for the benchmark interest rate at the end of this year while cutting it for 2016.
The federal funds rate will be 0.625 percent at the end of 2015, according to the median estimate in the Federal Open Market Committee’s quarterly Summary of Economic Projections, released in Washington on Wednesday. That’s unchanged from the March estimate and implies two rate increases this year, assuming officials move in quarter-point increments.
As investors prepare for potential market upheaval stemming from evolving Fed policy, they’re also coping with volatile price movements brought on by signs of expansion in the U.S. as well as in Europe.
German 10-year bund yields have risen to as high as 1.06 percent June 10 from a record low 0.049 percent April 17, amid signs that bond purchases by the European Central Bank are boosting growth and inflation. In that period, the 10-year Treasury yield rose as high as 2.50 percent from 1.87 percent.
While the Fed is trying to prepare financial markets for its first rate increase since 2006, the global economy still faces risks, including the renegotiation of bailout terms between Greece and creditor nations within euro region.