Treasury yields are little changed as Fed, Powell pledge to hold course on rates and asset purchases

The 10-year U.S. Treasury yield were little changed on Wednesday as the Federal Reserve officials reaffirmed their plan to keep interest rates and asset purchases steady even as the economic recovery gains steam.

The yield on the benchmark 10-year Treasury note edged lower to 1.62% at roughly 2:40 p.m. ET. The yield on the 30-year Treasury bond was trading at 2.29%. Yields move inversely to prices.

The Federal Open Market Committee concluded its two-day meeting on Wednesday and said at 2 p.m. that it planned to hold its benchmark interest rate steady near zero.

“”Amid progress on vaccinations and strong policy support, indicators of economic activity and employment have strengthened,” the committee said in a statement.

Fed Chair Jerome Powell said in a press conference that it would be “some time” before there was substantial further progress in the economic recovery and that it was “not time yet” to begin discussing a change to the central bank’s asset purchase program.

Yields gave up modest gains after Powell made those statements.

The committee also changed the language in its statement to acknowledge that inflation is rising, “largely reflecting transitory factors.” The previous statement said that inflation was running below the Fed’s 2% target.

Fed Chairman Jerome Powell is scheduled to hold a press conference at 2:30 p.m. ET, which investors will be watching closely for any clues on the direction of policy.

Aaron Anderson, senior vice president of research at Fisher Investments, said on Wednesday that while the FOMC had consistently communicated its plans to stick to its current policies for a long time, expectations of higher interest rates and tapering of quantitative easing were on the rise.

“One of the Fed’s biggest challenges is to convince the market it means what it says, especially as base effects and supply-chain bottlenecks cause certain inflation data to tick temporarily higher,” he said.

“The market will be listening closely for any signs the Fed is wavering on its ultra-accommodative policies,” Anderson added.

Fed bank officials, including Powell, have said that they expect a temporary rise in inflation as the U.S. economy accelerates its recovery from the coronavirus pandemic.

An auction was held Wednesday for $35 billion of 119-day bills.

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