(Updates to include analysts quotes, more data)
By Dion Rabouin
Dec 14 Shorter-dated U.S. Treasury yields rose
to their highest point in more than five years after the release
of the Federal Open Market Committee's rate decision and
statement on Wednesday in which the Fed announced a 0.25
percentage point increase to U.S. overnight interest rates.
Yields on two-year Treasury notes rose to their
highest level since August 2009, while three-year yields
hit their highest since May 2010 and five-year yields
rose to their highest since May 2011.
The FOMC also said it was expecting to raise rates three
times in 2017, an increase from the Federal Reserve's September
meeting at which the committee said it foresaw two increases.
The increase by 25 basis points to 0.5-0.75 percent was
largely expected but the increase of the Fed's so-called dot
plot caught the market slightly off-guard, analysts said,
leading to the selloff in shorter-dated maturities.
"That was a little bit more hawkish than we expected and it
looks like the market is taking that in stride as well," said
Collin Martin, director, fixed income at the Schwab Center for
Financial Research in New York. "It's a little bit more bearish
for the Treasury market than we had anticipated and we're seeing
that with yields across the curve up a few basis points."
Shorter-dated maturities are the most vulnerable to action
by the Federal Reserve as an increase in U.S. overnight interest
rates reduces their value most immediately.
The FOMC's longer term projections were little changed,
leading to less selling of Treasuries with longer-dated
"Changing the near-term means you are more certain that you
will have a little more rope to go," said Aaron Kohli, interest
rate strategist at BMO Capital Markets in New York. "They didn't
move any of the longer-term stuff so maybe that confidence isn't
supremely high but certainly it's improving for them."
U.S. two-year Treasury notes were last down 4/32 in price to
yield 1.238 percent, an increase of more than 8 basis points
from its late Tuesday levels. The three-year note dropped 7/32
in price to yield 1.527 percent, a gain of around 9 basis
points. The five-year note fell 13/32 in price for a
1.984-percent yield, 9 points higher.
Benchmark 10-year Treasury notes dropped 10/32
in price to yield 2.499 percent, a little more than 4 basis
points above its late Tuesday mark and the highest since
(Reporting by Dion Rabouin; Editing by James Dalgleish and Bill