US Treasury yields tick lower even after Fed hikes rates

  • The Federal Reserve hiked rates by a quarter point for a third and final time in 2017, a move widely anticipated by financial markets.
  • Though the committee did adjust its inflation forecast for 2018 to 1.7 percent from 1.6 percent, consistently higher prices have remained elusive.
  • Core CPI — which excludes volatile food and energy prices — ticked up 0.1 percent, missing expectations.

U.S. government debt yields fell on Wednesday even after the Federal Reserve decided to hike rates for a final time in 2017. Yields were already lower Wednesday after a measure of inflation came in less than expected.

While the Fed did feel confident enough in the economy to raise rates, the central bank did indicate that inflation may remain below its 2 percent target for the short term.

The yield on the benchmark 10-year Treasury note fell to 2.356 percent at 3:03 p.m. ET, while the yield on the 30-year Treasury bond fell to 2.738 percent. Bond yields move inversely to prices.

The yield on the 2-year Treasury note also slipped, falling to 1.786 percent.

Symbol
Yield
 
Change
%Change
US 3-MO
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US 1-YR
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US 2-YR
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US 5-YR
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US 10-YR
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US 30-YR
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Treasury yields edged lower following the Fed's decision to raise rates for a final time in 2017. The 0.25 point hike pushes the target range to 1.5 percent from 1.25 percent.

The central bankers seemed to follow market expectations, making good on its October announcement that, despite inflation, a rate hike was all but certain. Though the committee did adjust its inflation forecast for 2018 to 1.7 percent from 1.6 percent, consistently higher prices have remained elusive.

"We're still looking at three hikes in 2018, which is fully expected," said Ryan Detrick, senior market strategist for LPL Financial. "The big thing to us is that the GDP expectation [for 2018] was higher … They're really upping it to where everyone else already sees it."

With Congressional Republicans rushing to enact tax stimulus, the central bank may be forced to hike rates further should tax cuts put the economy at risk of overheating. A question-and-answer session with Fed Chair Janet Yellen is scheduled for 2:30 p.m ET.

The session also marks one of Yellen's final policy decisions before she hands over leadership to incoming Fed Chair Jerome Powell in February.

The Consumer Price Index (CPI) increased 0.4 percent, according to the Department of Labor, but the core CPI — which excludes volatile food and energy prices — ticked up 0.1 percent, missing expectations. The results raise the year-over-year increase in the CPI to 2.2 percent.

U.S. producer prices posted their biggest annual gain in nearly six years, according a Department of Labor statement on Tuesday, a sign that inflation may be finally creeping higher. The unemployment rate also remains at a historic low at 4.1 percent.

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Investors are digesting the latest in U.S. politics. Aside from developments surrounding overhauling the tax system — which is expected to keep investors on edge —another key piece of news set to shake up markets comes from Alabama.

Democrat Doug Jones is the apparent winner of a Senate election in Alabama, beating scandal-ridden Republican Roy Moore in one of America's deepest conservative states, according to NBC News.

The news is expected to trigger ramifications for U.S. politics, with this win marking the first time in a quarter-of-a-century that a Democrat has been elected to the Senate from Alabama.

CNBC's Gina Francolla contributed to this report.