10-year Treasury yield dips below 1.6% after Fed leaves rates unchanged

Treasury yields remained lower on Wednesday after the Federal Reserve left interest rates unchanged.

The yield on the benchmark 10-year Treasury note, which moves inversely to price, fell five basis points to around 1.585%, while the yield on the 30-year Treasury bond was also lower at around 2.048%. The gap between the three-month and 10-year Treasury yields narrowed to less than three basis points Wednesday.


The central bank's Federal Open Market Committee voted unanimously to hold interest rate steady in a range between 1.5%-1.75% at the conclusion of its policy meeting Wednesday.

"The Committee judges that the current stance of monetary policy is appropriate to support sustained expansion of economic activity, strong labor market conditions, and inflation returning to the Committee's symmetric 2 percent objective," policymakers said in a statement.

During a press conference following the rates decision, Fed chairman Jerome Powell said the central bank is "very carefully monitoring" the situation with the fast-spreading coronavirus. 

"The whole curve is falling," said Jim Paulsen, chief investment strategist at the Leuthold Group. "Yields really started to fall once he [Powell] got to podium and when he talked about the Chinese virus and all of its negatives. That's when the bond market started to tail off … It's reignited recession fears."

This week's decision marked the second straight meeting the Fed has kept the benchmark funds rate unchanged after cutting borrowing cost three times in 2019. The Fed, however, did adjust the interest it pays on funds stored at the central bank on Wednesday. The central bank hiked the interest on excess reserves rate 5 basis points to 1.6%.

Investors also kept an close eye on the coronavirus developments. Chinese authorities confirmed that the death toll has risen to 132 and the number of total cases has reached 5,974. Global investors have shown concerns about the impact of the virus on the overall economy. The White House has reportedly told airlines that it is considering suspending all flights from China to the U.S.

On the data front, data showed pending home sales, which measure signed contracts, not closings, dropped 4.9% in December compared with November, as the supply of homes hit a record low during the month. Sales were projected to rise 1% month-to-month.

— CNBC's Silvia Amaro contributed to this report.