U.S. Treasury yields fell slightly Wednesday morning ahead of the Federal Reserve’s key monetary policy announcement.
The yield on the 10-year Treasury bond fell below 3.41% after reaching an 11-year high of 3.48% on Tuesday, while the yield on the 30-year Treasury bond fell it dropped to 3.3840%. Yields move inversely to prices.
The Federal Open Market Committee will conclude its two-day meeting on Wednesday and is expected to take aggressive action on interest rates to try to curb inflation. The U.S. consumer price index rose 8.6% year-on-year in May, its highest year-on-year increase since 1981.
Traders had initially been looking for a 50 basis point increase in interest rates, but in light of high inflation, the market now values more than a 95% chance of a 75 basis point increase, the largest since 1994., according to the CME Group’s FedWatch tool. (1 basis point equals 0.01%)
The Federal Open Market Committee in May raised the federal funds rate target range from 0.75% to 1% from 0.25% to 0.5%.
As for the data, the May retail sales figures are due at 8:30 am ET.
A $ 30 billion 119-day Treasury bill auction will be held on Wednesday.
In Europe, the European Central Bank will hold an unscheduled monetary policy meeting on Wednesday, with rising bond yields for many eurozone governments.