Treasurys Stay Higher As Fed Cuts Rates
(12-11) 11:37 PST NEW YORK, (AP) —
Treasury prices rallied Tuesday after the Federal Reserve lowered the Federal funds target and discount rates while signaling that more rate cuts are an option.
The Fed reduced the Fed funds overnight target by 0.25 percentage point to 4.25 percent and also reduced the discount rate, which is charged to commercial banks that borrow directly from the central bank, by a 0.25 percentage point to 4.75 percent.
The action was broadly in line with market expectations, although some investors had expected a heftier 0.50 percentage point cut in the rates. Still, bond investors were pleased to see the bank cheapen the price of money because that will stimulate troubled credit markets.
The Fed’s monetary policy statement made clear that the central bank is concerned about both increasing economic uncertainty and the pace of inflation. The central bank described growth as slowing and the housing sector as worsening.
Notably, the Fed removed a statement that was included in the prior communiques stating that risks to the economy are balanced,
The price on the benchmark 10-year Treasury note rose 28/32 to 101 11/32 with a yield of 4.04 percent, down from 4.16 percent late Monday. Prices and yields move in opposite directions.
The 30-year long bond gained 1 17/32 to 107 21/32 with a yield of 4.52 percent, down from 4.62 percent Monday.
The 2-year note gained 10/32 to 100 71/32 with a yield of 3.00 percent, down from 3.18 percent.
