Bond Market Update

Short End Turns Lower

• U.S. Treasuries slid to lows in immediate reaction to the June FOMC Statement, which was released a few minutes ago, before trimming their losses. As expected, the Statement had no headline surprises, but the first release under the leadership of Kevin Warsh differed significantly from the April directive. It was much shorter, simply announcing the decision to keep the fed funds rate range steady, with an added observation that economic activity is expanding at a solid pace despite elevated uncertainty. The Statement acknowledged that inflation has remained elevated, which prompted an increase to the central bank's PCE forecast for 2026 to 3.6% from 2.7% while the outlook for 2027 was increased to 2.3% from 2.2%. The central bank also nudged its 2026 unemployment rate forecast down to 4.3% from 4.4% while the growth outlook for this year was lowered to 2.2% from 2.3% in the set of projections from March. The median forecast for the fed funds rate at the end of the year increased to 3.8% from 3.4%. As a result, the post-FOMC selling has been led by the 2-yr note while the long bond has climbed off its low, returning to little changed.
• Yield Check:
  • 2-yr: +8 bps to 4.13%
  • 3-yr: +7 bps to 4.16%
  • 5-yr: +6 bps to 4.21%
  • 10-yr: +3 bps to 4.45%
  • 30-yr: UNCH at 4.93%