Stocks and Treasury yields ticked higher after the Federal Reserve said it would keep interest rates near zero and its bond buying stable until substantial further progress on its goals is made, in line with what investors and Wall Street strategists expected.
The central bank said in its latest policy statement Wednesday that it will keep rates near zero, and that it will keep buying $120 billion of Treasuries and mortgage-backed securities until it sees “substantial further progress” toward its goals.
While the news was largely expected, stock benchmarks crept up from their pre-statement levels. The Dow Jones Industrial Average was down 0.3%, compared with a 0.5% decline before the statement. The S&P 500 was up 0.2% in recent trading, compared to near unchanged levels before the release. Yields briefly jumped on Treasuries maturing in 5, 7, 10 and 30 years, but the advance was short-lived and they shortly returned to levels from earlier in the day.
After the market’s worst quarter since 1980, a selloff in Treasuries has stalled. As of Tuesday, the 10-year yield had declined 11 basis points, or hundredths of a percentage point, since the end of March.
Just this week, however, bond markets have again started to price in higher demand for inflation protection. As of Wednesday afternoon, the market implied inflation averaging 2.4% over the next decade, and that gauge was on track for its biggest one-week climb since the beginning of February, when the first-quarter selloff in Treasuries was picking up.
Investors will now look to comments from Fed Chairman Jerome Powell in a press conference starting at 2:30 p.m.
Write to Alexandra Scaggs at firstname.lastname@example.org