Treasuries Rally as Oil Prices Cool and Fed Confidence Grows

US Treasuries rallied on Thursday as oil prices cooled and confidence in the Federal Reserve's inflation-fighting efforts grew. The Fed raised interest rates by 25 basis points to 3.75%-4%, a move that had been largely priced in by markets.

The bigger focus was on Fed Chair Kevin Warsh's stance on inflation, which pushed traders to price in at least one more rate increase this year and as many as two in 2027. 'The Fed seemed credible in terms of fighting the inflation tail risk, that's a positive for bond investors,' said Michael Chang, an analyst at Citi.

The decline in oil prices also weighed on demand for a $19 billion reopening of 10-year Treasury inflation-protected securities. The auction cleared at a 2.653% yield, around two basis points above its pre-auction level, suggesting demand was weaker than expected.