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Treasury yields fall ahead of Fed announcement

Treasury yields dipped on Wednesday as investors looked ahead to the Federal Reserve’s latest monetary policy decision and outlook for the economy.

The yield on the benchmark 10-year Treasury note fell about 4 basis points to 0.778%. The yield on the 30-year Treasury bond was also down at 1.527%. Yields move inversely to prices.

The central bank will announce its decision at 2 p.m. ET before a press conference from Chairman Jerome Powell at 2:30 p.m. Although the Fed is not expected to cut interest rates below its current 0%-0.25% bound, some speculation has arisen that it could take steps to control the yield curve following a recent spike in yields.

The Fed will also release its economic projections on Wednesday to indicate where the policymakers see GDP, unemployment and inflation heading as the U.S. begins its recovery from the coronavirus pandemic. In addition, the Fed will release its “dot plot” of individual members’ projections for interest rates. 

Data on Wednesday showed the consumer price index fell 0.1% in May, marking the third straight month of decline. The slight dip came after a 0.8% plunge in April amid the pandemic, which was the largest decline since December 2008. 

Concerns have resurfaced around the reopening of economies as parts of California and the Southwest experience a fresh spike in coronavirus cases and hospitalizations. The virus is now confirmed to have infected more than 1.9 million Americans and more than 7.2 million people worldwide.

Data published Tuesday revealed that U.S. layoffs declined in April, but remained at the second-highest monthly total on record. Hiring fell to an all-time low, indicating that the impact of the coronavirus crisis on the labor market could drag on.

Auctions will be held Wednesday for $35 billion of 105-day Treasury bills and $40 billion of 154-day bills.

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