Bond Market Update

FOMC Reaction Muted

• U.S. Treasuries of most tenors continue trading near their recent levels, having shown a limited immediate reaction to the FOMC Statement. The long bond has bucked the trend, facing some relative weakness. The Statement was not surprising on the surface, as the Fed announced the long-awaited 25-basis point rate cut. However, the central bank also announced that it will begin purchasing Treasury bills on Friday. It plans to buy $40 bln worth of bills over the next month, followed by updated totals for the following months on or around the ninth day of each new month. Besides the FOMC Statement, the FOMC released its Summary of Economic Projections, showing an increase in the 2026 GDP growth forecast to a range of 2.1% to 2.5% from 1.7% to 2.1%. The 2026 PCE forecast was narrowed to a range of 2.3% to 2.5% from 2.4% to 2.7%. The 2026 fed funds rate range was forecast between 2.9% and 3.6%, unchanged from the September projection.
• Yield Check:
  • 2-yr: -4 bps to 3.57%
  • 3-yr: -3 bps to 3.62%
  • 5-yr: -2 bps to 3.76%
  • 10-yr: -2 bps to 4.17%
  • 30-yr: -1 bp to 4.80%