Fed's Steady Hand Sends US Treasury Yields Soaring
US Treasury yields surged to their highest levels since 2007 after the Federal Reserve chose not to raise interest rates at its latest meeting, despite growing concerns about inflation. The decision, announced on Wednesday, has led bond traders to lower their expectations for a rate hike in September.
The probability of a rate increase in September, as reflected by interest-rate swaps, now stands at around 60%. This represents a decrease from previous expectations, even as some Fed officials have signaled that they believe a hike is necessary to control rising inflation.
Chairman Kevin Warsh's team has kept the benchmark interest rate steady, and the decision to keep borrowing costs unchanged was widely expected. However, the market reaction suggests that investors are still waiting for clear signals from the Fed on its future policy direction.