Treasuries Slip As Fed Tweaks Language Around Inflation Fight

US Treasuries fell to the day’s lows as the Federal Reserve tweaked its policy statement to remove a reference to progress on the fight against inflation.

The slide in US government bonds pushed yields higher on Wednesday after Fed officials left interest rates steady, as expected. The policy-sensitive two-year yield was up about five basis points to 4.25%, while 10-year rate rates rose four basis points. 

Swaps traders pared back their expectations for rate reductions this year, pricing in 43 basis points of cuts compared to 48 basis points prior to the Fed’s announcement. 

“This does not sound like a Fed that’s looking for the next opportunity to cut rates,” Bob Michele, JPMorgan Asset Management’s chief investment officer for global fixed income, said on Bloomberg Television.

Although policymakers left the federal funds rate band at 4.25%-4.5%, traders will look for any hints on the path ahead when Fed Chair Jerome Powell speaks to reporters beginning at 2:30 p.m. New York time.

Expectations for further easing at their March meeting increased at the beginning of the week during a tech-driven rout in stocks that fueled demand for Treasuries. 

Many investors see long-term yields stuck in a range given widespread uncertainty over President Donald Trump’s policies, particularly with regard to tariffs. 

“For the bond market, we think it’s a holding pattern for the next couple of quarters,” Guneet Dhingra, head of US rates strategy at BNP Paribas, said just ahead of the decision. “We think the Fed is on hold for the remainder of 2025 and might resume cuts at some point in 2026.”