US Treasuries held small losses after the Federal Reserve held interest rates steady and reinforced traders’ expectations that tightening will resume in December.
The declines on Wednesday sent yields higher after the rate decision, with those on two year notes — which are more sensitive to the Fed’s policy path — up about three basis points to 4.76%. Traders were pricing in about a 90% chance of a quarter-point rate increase when policymakers next meet in December.
Fed officials led by Chairman Kevin Warsh left US borrowing costs at 3.75%-4%, though two policymakers dissented from that decision. They raised rates in September for the first time in three years. Investors will monitor Warsh’s news conference at 2:30 p.m. in Washington for any hints on the central bank’s reasoning and outlook, even though he’s opposed offering guidance to markets.
In the lead-up to the October meeting, remarks from several Fed officials — New York Fed President John Williams, Vice Chair Philip Jefferson and Governor Christopher Waller — had prompted traders to pull back on their wagers for a hike this month. Around the same time, a selloff that had sent US Treasury yields to multidecade highs began to stall as jitters around the artificial intelligence trade sent investors in search of havens.
A Bloomberg index of the Treasury market’s returns is up 1.9% in October through Tuesday’s close, on course for its best monthly performance since early 2025.