Treasuries were quiet for the first half of the day as the market waited for the FOMC to announce its rate decision. More on that below. The two-year finished the day unchanged, and the ten-year was lower by 3/4. The benchmark curve was steeper by 9 basis points on the day, and currently sits at +215 basis points. A basis point represents .01%.Rates rose today to levels not seen since November 25th of last year as the market was disappointed to hear that the Fed was going to stand pat on its MBS, Agency and Treasury buying commitments. The yield on the ten-year rose as high as 3.11% in afternoon trading, well through the support level of 3.05%.
The decision to not increase purchases most likely stems from the spread tightening between the ten-year and mortgage rates in the last three months. Thirty-year fixed mortgage rates currently sit at 4.62%, so although Treasury yields have inched higher, the desired effect is being felt. However, the Treasury’s concerns still remain. Borrowing costs are increasing, and with a record deficit to finance rates will only continue to increase if demand cannot keep pace with supply.
Have a great evening.
Cliff J. Reynolds Jr., Junior Analyst
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