Reuters – U.S. Treasury debt prices jumped on Tuesday, pushing the benchmark note’s yield down to fresh five-decade lows, after the Federal Reserve slashed interest rates near zero and vowed to extend its quantitative easing measures.
In an unprecedented move, the Fed cut its target for overnight interest rates to a target of zero to 0.25 percent, the lowest on record.
"The decision is setting the Treasury market rallying because of a more dramatic move than the market expected," said Haag Sherman, co-founder and managing director of Salient Partners in Houston, Texas. "The Fed has been sending a message it will throw everything it has at deflation," and Tuesday’s aggressive rate cut and policy statement reinforced that message, he said.
The benchmark 10-year Treasury note’s price, which moves inversely to its yield, jumped 1-16/32, pushing its yield down to a five-decade low of 2.35 percent <US10YT=RR>, versus 2.52 percent late Tuesday.
"The focus of the Committee’s policy going forward will be to support the functioning of financial markets and stimulate the economy through open market operations and other measures that sustain the size of the Federal Reserve’s balance sheet at a high level," said the policy-setting Federal Open Market Committee in its accompanying statement.