New Delhi [India], October 7 (ANI): Ahead of the Federal Reserve’s September policy meeting minutes, the US 30-year Treasury yield climbed to a fresh 24-year high on Wednesday as a selloff returned to global bond markets amid concerns over inflation and rising government debt.
The 30-year yield briefly touched 5.7041 per cent, reversing some of the relief seen in the previous session. Bond yields across major markets also moved higher as persistent inflation and fiscal concerns weighed on sentiment, while a renewed rise in crude oil prices added to price pressures.
Brent crude futures rose more than 1 per cent during the session. At the time of reporting, Brent was trading at around USD 101.85 per barrel, while West Texas Intermediate (WTI) crude was at around USD 89.75 per barrel.
Rajeev Radhakrishnan, CFA, CIO, Fixed Income & Head of Research (Fixed Income) SBI Mutual Fund noted, “The up move in long term bond yields is a structural issue driven by elevated inflation and more importantly weaker fiscal settings. To the extent that markets have been conditioned by continuous central bank support over the years, withdrawal of monetary accommodation by central banks also add to the weaker demand settings.”
On the other hand, Ankita Pathak, Head, Global Investments at Ionic Asset said, “The current rise in yields is a function of high growth, AI buildout crowding out and fiscal concerns. It is hard for yields to subsidise materially but all yield spike may not be viewed from risk off lens, some is also reflecting better growth. With US earnings starting soon, we believe more earnings based valuation reset is possible. Yields will ease when crude corrects, more yield curve control is brought in or AI buildout slows. All are likely but not necessary events translating into potentially sticky yields in the short term”
At its September meeting, the US Federal Reserve raised its benchmark interest rate by 25 basis points, marking its first rate increase since 2023, as policymakers responded to persistent inflationary pressures and changing economic conditions.
Federal Open Market Committee (FOMC) increased the target range for the federal funds rate by a quarter percentage point to 3.75-4 per cent. The decision was approved unanimously by a 12-0 vote.
The rate increase was broadly in line with market expectations, with traders assigning an over 90 per cent probability to a 25-basis-point hike ahead of the decision.
“The Committee decided to raise the target range for the federal funds rate by 1/4 percentage point to 3-3/4 to 4 percent, in support of the Federal Reserve’s dual mandate,” the FOMC said in its monetary policy statement.
The Fed said the US economy continued to expand at a solid pace despite uncertainties, including those stemming from geopolitical developments. Domestic spending remained resilient, while productivity growth and capital investment stayed strong. Employment growth kept pace with an expansion in the workforce, with the unemployment rate remaining broadly unchanged.
To implement the rate decision, the Federal Reserve Board unanimously approved an increase in the interest rate paid on reserve balances to 3.90 per cent, effective September 17. The FOMC also directed the Federal Reserve Bank of New York’s Open Market Desk to conduct operations needed to keep the federal funds rate within the revised target range. (ANI)
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