Treasuries Rally on `Policy Mistake' Concerns as Curve Flattens

Treasuries surged as the Federal Reserve’s decision to raise interest rates for a fourth time this year and signal further tightening, albeit at a reduced pace, stoked concern that policy makers will stifle economic growth.

Benchmark 10-year yields traded below 2.75 percent for the first time since April, while the spread between 2- and 10-year Treasury yields sank to about 11 basis points, not far from the lowest since 2007. Policy makers raised their target rate by a quarter-point, as expected, and revised their so-called dot plot from projecting three hikes next year to two, also as many analysts projected. Yet stocks tumbled as some investors may have been counting on a stronger acknowledgment of recent equities turbulence.