Treasuries Slump As Powell Comments Offset Optimism About December Rate Cut

(RTTNews) - Treasuries showed a lack of direction throughout much of the trading day on Wednesday before coming under pressure in the latter part of the session.

Bond prices moved sharply lower in late-day trading after spending most of the day lingering near the unchanged line. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, jumped 7.5 basis points to 4.058 percent.

With the significant increase on the day, the ten-year yield reached its highest closing level in nearly three weeks.

The late-day weakness among treasuries came in reaction to Federal Reserve Chair Jerome Powell's comments following the central bank's monetary policy announcement.

While the Fed lowered interest rates by another quarter point as widely expected, Powell's post-meeting remarks have partly offset optimism about another rate cut in December.

Powell said a further reduction in rates in December is "not a foregone conclusion," noting Fed officials had "strongly differing views about how to proceed" at the final meeting of the year.

Highlighting the high level of uncertainty due to government shutdown delaying key data, Powell also said there's a "growing chorus" that feels the Fed should "wait a cycle" to continue cutting rates.

Following Powell's comments, CME Group's FedWatch Tool indicates the chances the Fed leaves rates unchanged in December have jumped to 33.3 percent from just 9.1 percent yesterday.

The Fed chief's remarks came after the central bank said it decided to lower the target range for the federal funds rate by 25 basis points to 3.75 percent to 4.0 percent.

The central bank once again cited a shift in the balance of risks, noting the downside risks to employment have risen in recent months.

While another quarter point rate cut was widely expected, there was some disagreement among Fed officials.

Recently confirmed Fed Governor Stephen Miran once again preferred a half point rate cut, while Kansas City Fed President Jeffrey Schmid preferred to leave rates unchanged.