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10-year yield dips below 2% after Fed announcement

Bond yields fell further after the Fed signaled a more cautious outlook for economic growth and cut its projections for interest rates, in a sign that it remains concerned about the health of the recovery.

Benchmark 10-year note yields fell to 1.916 percent, from a yield of 2.05 percent before the central bank's announcement.

Five-year and seven-year note yields hit nearly three-week lows of 1.477 percent and 1.797 percent, respectively, after the decision, while 30-year bond yields fell to 2.57 percent, from a yield of 2.61 percent earlier.

On the short end of the yield curve, three-year note yields dropped to 0.934 percent, the lowest since early February, after the start of Fed Chair Janet Yellen's news conference in the wake of the release.

Read MoreFed indicates rate hikes coming, but not in April

"Asymmetric" risks to low interest rates suggest that it's best to wait longer to raise rates, Yellen told members of the press Wednesday, adding that she doesn't think its appropriate to provide calendar-based guidance.

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In its statement after a two-day meeting, the Fed's policy-setting committee repeated its view that job market conditions had improved and gave its strongest signal to date that it was nearing its first rate hike since 2006.

The statement put a June rate increase on the table, though it also allowed the central bank enough flexibility to move later in the year, stressing that any decision would depend on incoming data.

"The committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium-term,'' the Fed said in its statement.

"I think they did what they should have done, I'm a little surprised in terms of the dovishness," BIll Gross of Janus Capital told CNBC's "Power Lunch" on Wednesday.

He says although the Fed dropped "patient" from its statement, he thinks "prudence" will be the new buzzword.

"The Fed expressed a lot of prudence and concern going forward," Gross said, noting the central bank's concerns about the potential for inflation and global weakness in international development.

Gross now sees the first rate hike occurring in September. On the other hand, the fed funds futures rate suggests 41 percent chance for a September rate hike, versus a 59 percent possibility before 2 p.m. ET. It now sees a 62 percent possibility for a rate hike in October.

—Reuters contributed to this report.