* Fed hikes rates for second time in three months
* Fed sticks to outlook for two more rate hikes this year
* 2-, 3-year yields fall from multiyear highs to 8-day lows
* Long-, medium-dated yields also fall
(Updates prices, adds analyst comment)
By Sam Forgione
NEW YORK, March 15 U.S. Treasury yields
plummeted on Wednesday after the Federal Reserve raised interest
rates for the second time in three months as expected, but did
not flag any plan to accelerate the pace of monetary tightening.
U.S. two- and three-year yields, which are most vulnerable
to Fed policy, fell from multiyear highs touched during morning
U.S. trading after the Fed said in its policy statement that
further rate increases would only be "gradual," with officials
sticking to their outlook for two more rate hikes this year and
three more in 2018.
The decision to lift the target overnight interest rate by
25 basis points to a range of 0.75 percent to 1.00 percent
marked one of the Fed's most convincing steps yet in the effort
to return monetary policy to a more normal footing.
The projections for just two more rate hikes in 2017 was
viewed as dovish, however, since JPMorgan economist Michael
Feroli and others speculated prior to the decision that an
increase to four hikes for the entirety of this year was a
"Many in the market had positioned for a bit more of a
hawkish-sounding Fed in the statement and the (outlook) than was
actually delivered," said Mark Cabana, head of U.S. short rates
strategy at Bank of America Merrill Lynch in New York.
Fed Chair Janet Yellen said in a press conference following
the decision that risks to the global economy were more
balanced, but that she expected policy to remain accommodative
for some time.
U.S. two- and three-year yields sank to eight-day lows after
the statement of 1.303 percent and 1.590 percent, respectively.
Those yields had touched their highest since June 2009 and April
2010, respectively, before the statement.
U.S. long- and medium-dated yields also fell, with 30-year
and benchmark 10-year yields hitting
eight-day lows of 3.094 percent and 2.497 percent, respectively.
Seven- and five-year yields hit nine-day
lows of 2.296 percent and 2.006 percent, respectively.
"The market was concerned about potential acceleration and,
if anything, it was a deceleration in the confidence about the
future pace and that’s allowing the bond market to take yields
modestly lower right afterwards," said Matt Toms, Chief
Investment Officer of fixed income at Voya Investment Management
Benchmark 10-year Treasuries were last up 26/32 in price to
yield 2.500 percent, from a yield of 2.595 percent late Tuesday.
Two-year notes were last up 5/32 in price to stand at
their session low yield of 1.303 percent, from a yield of 1.380
percent late Tuesday.
March 15 Wednesday 4:30PM New York / 2030 GMT
US T BONDS JUN7 148-9/32 1-14/32
10YR TNotes JUN7 123-192/256 0-224/25
Price Current Net
Yield % Change
Three-month bills 0.72 0.7313 -0.044
Six-month bills 0.8625 0.8783 -0.054
Two-year note 99-168/256 1.3034 -0.077
Three-year note 100-26/256 1.5901 -0.094
Five-year note 99-94/256 2.0097 -0.113
Seven-year note 98-216/256 2.3058 -0.108
10-year note 97-204/256 2.5021 -0.093
30-year bond 97-200/256 3.1145 -0.059
DOLLAR SWAP SPREADS
Last (bps) Net
U.S. 2-year dollar swap 34.00 1.50
U.S. 3-year dollar swap 25.75 0.75
U.S. 5-year dollar swap 10.75 1.00
U.S. 10-year dollar swap -3.25 0.00
U.S. 30-year dollar swap -38.75 -0.50
(Reporting by Sam Forgione; additional reporting by Dion
Rabouin; Editing by Lisa Shumaker and Diane Craft)