Treasury rally cools as the Fed signals there is no rush to cut rates

(Bloomberg) — U.S. Treasury bonds pared gains on Wednesday after the Federal Reserve kept interest rates steady but signaled it was in no rush to ease policy.

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The Fed’s policy statement ended the rally earlier in the day, when yields fell as data showed a cooling in the labor market, technology stocks tumbled and an unexpected quarterly loss at a New York bank fueled concerns about the financial health of revived regional lenders. .

Yields remained low on the day, with two-year government bond yields falling about 7 basis points to 4.26%, after falling as much as 15 basis points earlier. The ten-year interest rate – a baseline for mortgages and corporate loans – fell by 6 basis points to 3.97%.

The Fed’s statement that it does not expect to cut rates until it has more confidence that inflation is moving steadily toward its target undermined confidence in financial markets that it would do so as early as March. This expectation has driven bond yields sharply lower since late last year, boosting stock prices and easing financial conditions.

“The markets really want much more aggressive rate cuts from the Fed,” Diane Swonk, chief economist at KPMG LLP, said on Bloomberg television. “I think they’ll start in May.”

Expectations about interest rate cuts were supported by job creation and labor cost figures released earlier Wednesday. At the same time, investors sought refuge after shares of New York Community Bancorp tumbled when it reported an unexpected quarterly loss, stoking concerns about the U.S. banking system that flared last year after the collapse of Silicon Valley Bank.

The rally in US government bonds supported global government bonds, with higher yields…

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