Treasury yields edged higher Wednesday morning as investors awaited the Federal Reserve’s latest interest rate decision, with the central bank widely expected to hold borrowing costs steady.
The benchmark 10-year Treasury yield traded above 5.02% by mid-morning, up roughly 3 basis points from Tuesday’s close. The 10-year note, which serves as the main benchmark for mortgages, auto loans and credit card rates, dipped below 5% last week for the first time since Sept. 23.
The 30-year Treasury yield rose about 1.5 basis points to roughly 5.32%, after topping 5.33% earlier in the session. The 2-year yield, which more closely tracks Fed policy, climbed more than 3 basis points to about 4.77%.
Bond yields surged throughout the summer and early fall as mounting government debt and rising oil prices rattled markets. Energy costs have spiked amid the conflict with Iran, with Brent crude trading near $116 a barrel this week after topping $117 last week.
The Federal Open Market Committee will announce its decision at 2 p.m. Eastern time, six weeks after policymakers raised rates by a quarter point to a target range of 3.75% to 4%. That September move was the Fed’s first rate hike since 2023 and drew unanimous support from all 12 voting members.
Traders are pricing in roughly a 90% chance that the Fed will leave rates unchanged this time, according to the CME FedWatch Tool. A Reuters survey conducted Oct. 16-20 found that 94 of 100 economists expected no change in October.
But markets are bracing for more tightening ahead. Nearly 75% of traders expect at least one more hike by year-end, and all 100 economists in the Reuters survey forecast a rate increase in December.
Some analysts say the timing also matters. With the midterm elections less than a week away, many observers believe the Fed is unlikely to raise rates this month.
Fed Chair Kevin Warsh will hold a press conference at 2:30 p.m., and investors will be listening closely for any signals about future moves. Since the Fed is not releasing updated economic projections this month, Warsh’s remarks and any dissenting votes could shape expectations for December.
Deutsche Bank analysts said attention will focus on how the Fed balances still-elevated inflation and solid economic growth against the recent tightening in financial conditions.
Warsh has previously suggested that rising long-term yields reflect markets responding to economic data, and some officials have characterized the bond market selloff as doing part of the Fed’s work. New York Fed President John Williams has called another hike by year-end a reasonable expectation.
For American households, the outlook points to elevated borrowing costs for the foreseeable future. Higher rates continue to weigh on homebuying, vehicle sales and credit card balances.
Investors will also be watching Thursday’s release of the personal consumption expenditures index, the Fed’s preferred inflation gauge, for further clues on the path of interest rates.
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