NEW YORK (AFX) - Treasury bonds rose Thursday, particularly in shorter maturities, after the Federal Reserve raised interest rates but gave investors hope it may soon pause its tightening cycle.
The Federal Open Market Committee Thursday hiked the Fed funds target rate to 5.25 percent from 5.00 percent -- the 17th successive quarter-point rise. The central bank has now lifted the funds rate 4.25 percent since June 2004.
At 5 p.m., the 10-year Treasury note was up 12/32 from Wednesday. Its yield was 5.20 percent, down from 5.25 percent. Bond yields move inversely to prices.
The 30-year bond was up 18/32. Its yield fell to 5.25 percent from 5.29 percent.
The 2-year note was up 5/32. Its yield fell to 5.19 from 5.28 percent.
Yields on 3-month Treasury bills were 4.99 percent, down from 5.00 percent, as the discount was virtually unchanged at 4.87 percent.
The yield curve, the gap between the two- and 10-year yields, stood at positive 1 basis point or 0.01 percent, compared with negative four basis points ahead of the meeting.
In the statement accompanying the decision, policy makers noted that 'readings on core inflation have been elevated in recent months.' However, they also noted that growth is moderating, which should help limit inflation pressures over time.
'Any additional firming that may be needed to address' continued inflation risks will depend on incoming data, the statement said, leaving its options open for the next move.
The tone of the statement took some of the wind out of expectations for another quarter point rate hike at the Fed's next meeting Aug. 8 and sparked modest gains in the battered Treasury market, which has suffered in the past two weeks on concerns that the Fed could extend its hiking campaign.
John Canavan, economist at Stone & McCarthy in New York, said the statement 'affected the Treasury market in just the way it should -- primarily by steepening the curve. The Fed raised rates and at least appeared to open to door to a possible pause,' he said.
Before the meeting, 'the market had fully priced in another move in August. The FOMC statement today suggested that the market was more certain of this than the Fed were.'
Madeleine Lim and Brian Blackstone in New York contributed to this article.
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