Treasury yields jumped on Wednesday after the Federal Reserve said it will accelerate the reduction of its monthly bond purchases and signaled three interest rate increases in 2022.
The yield on the benchmark 10-year Treasury note rose about 3 basis points to 1.469%. The yield on the 2-year Treasury bond, the rate most sensitive to monetary policy, climbed as much as 6 basis points to 0.75%. Yields move inversely to prices and 1 basis point is equal to 0.01%.
The U.S. central bank will be buying $60 billion of bonds each month starting January, half the level prior to the November taper and $30 billion less than it had been buying in December. The Fed was tapering by $15 billion a month in November, doubled that in December, then will accelerate the reduction further come 2022.
After that wraps up, probably around March, the central bank expects to start raising interest rates, which were held steady at this week’s meeting.
Projections released Wednesday indicate that Fed officials see as many as three rate hikes coming in 2022, with two in the following year and two more in 2024.
“Jerome Powell is fighting to make up for lost time following the latest run of bad news on inflation, and today is a reflection of that,” said James McCann, Aberdeen Standard Investments’ deputy chief economist. “The Fed’s really had to demonstrate that they’re willing to move faster and go further to tighten policy more than previously planned as they’ve slipped behind the curve over recent months. It was vital that the Fed acted now to protect its credibility on inflation.”
Meanwhile, November’s retail sales rose by 0.3%. Economists surveyed by Dow Jones had penciled in a rise of 0.8%.
An auction is scheduled to be held on Wednesday for $35 billion of 119-day bills.
— CNBC’s Maggie Fitzgerald contributed to this marker report.
