The 10-year U.S. Treasury yield moved higher Wednesday after the Federal Reserve announced it would start tapering pandemic-era aid later this month.
The yield on the benchmark 10-year Treasury note rose 2.8 basis points to 1.575% at 3:49 p.m. ET. The yield on the 30-year Treasury bond rose 3.6 basis points to 1.994%. Yields move inversely to prices and 1 basis point is equal to 0.01%.
The central bank announced at the end of its two-day policy meeting Wednesday afternoon that it will start winding down its $120 billion monthly bond-buying program, in the first step to paring back its emergency economic stimulus measures.
“The tapering announcement is right in line with expectations,” said Kathy Jones, chief fixed-income strategist at Charles Schwab.
Tapering will begin “later this month,” the Federal Open Market Committee said in its post-meeting statement. The Fed will reduce purchases by $15 billion each month — $10 billion in Treasurys and $5 billion in mortgage-backed securities, on track to end quantitative easing by the middle of 2022.
The statement also said elevated inflation is reflecting factors “expected to be transitory,” but noted some uncertainty.
“We took a step back from ‘transitory.’ We said ‘expected to be transitory,’ first of all, to show uncertainty around that,” Fed Chairman Jerome Powell said in a press conference following the statement release.
The messaging from the central bank Wednesday “has shifted a bit to acknowledge the inflation pressure, but talk more about the Fed doing risk management now between inflation and the unemployment mandate,” Jones said.
The FOMC also voted not to raise interest rates, in line with market expectations.
“Our decision today to begin tapering our asset purchases does not imply any direct signal regarding our interest rate policy. We continue to articulate a different and more stringent test for the economic conditions that would need to be met before raising the federal funds rate,” Powell said.
Oliver Blackbourn, portfolio manager at Janus Henderson, told CNBC’s “Squawk Box Europe” on Wednesday that the Fed had “really gone out of its way this year to lay the groundwork for this announcement.”
Wednesday’s ADP report showed that private job creation rose in October thanks to a burst in hiring in the hospitality sector.
Companies added 571,000 for the month, beating the 395,000 Dow Jones estimate and just ahead of September’s downwardly revised 523,000. It was the best month for jobs since June.
—CNBC’s Rich Mendez contributed to this report.
