Bonds

Treasury yields are little changed Fed, Powell pledge to hold course on rates and asset purchases

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Key Points
  • The Federal Open Market Committee concluded its two-day meeting on Wednesday and said at 2 p.m. that it planned to hold its benchmark interest rate steady near zero.
  • The central bank also plans to continue its monthly asset purchases.

Treasury yields were calm on Wednesday as the Federal Reserve officials reaffirmed their plan to keep interest rates and asset purchases steady even as the economic recovery gains steam.

The yield on the benchmark 10-year Treasury note edged lower to 1.615% in afternoon trading. The yield on the 30-year Treasury bond was trading at 2.294%. Yields move inversely to prices.

Treasurys

The Federal Open Market Committee concluded its two-day meeting on Wednesday and said at 2 p.m. ET that it planned to hold its benchmark interest rate steady near zero.

""Amid progress on vaccinations and strong policy support, indicators of economic activity and employment have strengthened," the committee said in a statement.

Fed Chair Jerome Powell said in a press conference that it would be "some time" before there was substantial further progress in the economic recovery and that it was "not time yet" to begin discussing a change to the central bank's asset purchase program.

Yields gave up modest gains after Powell made those statements.

The committee also changed the language in its statement to acknowledge that inflation is rising, "largely reflecting transitory factors." The previous statement said that inflation was running below the Fed's 2% target.

Wells Fargo bond strategist Michael Schumacher said Powell's remarks removed any doubt that the Fed would alter its course on bond buying before the summer.

"He's certainly getting rid of tapering happening any time soon. He's slamming that door shut," he said. "It means that yields are a little less likely to go rocketing up. You're not going to get that wild card event where the Fed does talk about tapering fairly soon," Schumacher said.

"It will be more interesting in June," he added. "You'll have a couple of months of hotter inflation prints. There will be more pressure on the Fed to explain this inflation framework."

Fed bank officials, including Powell, have said that they expect a temporary rise in inflation as the U.S. economy accelerates its recovery from the coronavirus pandemic.

An auction was held Wednesday for $35 billion of 119-day bills.

-CNBC's Patti Domm contributed to this report.