Treasuries Gain as Fed Indicates Slow Approach to Rate Increases

Treasuries rose as the Federal Reserve left its benchmark interest rate unchanged and signaled it’s open to raising interest rates in June.

Bonds were set to gain for the first time in eight days, which would snap the longest slide since 2014, after officials held their target range for the federal funds rate at 0.25 percent to 0.5 percent following a two-day meeting in Washington. The Federal Open Market Committee omitted previous language that “global economic and financial developments continue to pose risks,” instead saying officials will “closely monitor” such developments, according to a statement released Wednesday.

Futures traders dialed back expectations for the pace of rate increases after the Fed’s March meeting, when officials cut their median forecast for 2016 hikes to two from four. 

Traders aren’t fully pricing in another Fed move until February, while driving a gauge of expected volatility in Treasuries to the lowest since 2014 this month. After raising rates for the first time in nearly a decade in December, the Fed is trying to tighten policy as central banks abroad maintain or increase stimulus amid a tepid global economic expansion and weak inflation.

Benchmark 10-year note yields declined four basis points, or 0.04 percentage point, to 1.89 percent as of 2:08 p.m. New York time, according to Bloomberg Bond Trader data.

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