Treasury yields moved higher after the Federal Reserve held its policy rate with two dissents for an increase. The five year yield rose 3.1 basis points to 4.87 percent, the 10 year rose 5.2 basis points to 5.05 percent and the 30 year rose 5.6 basis points to 5.36 percent at the most recent close.
The move is a repricing of the path, not of the meeting. Wednesday’s decision was the priced outcome, but the 10 to 2 split, with Lisa Cook and Beth Hammack preferring a hike, and Chair Warsh’s insistence that sector price rises must not broaden, left December as a live tightening meeting. The bond market charged for that risk immediately, and more at the long end than the front, which is the signature of term premium and inflation persistence being priced rather than a single meeting.
Context matters for the level. Even after Thursday’s rise, yields are lower on the week: the five and 10 year are each down 10.1 basis points over five sessions and the 30 year is down 7.8 basis points. The curve sold off from a stronger position, not a weaker one, and the 10 year closing back above 5 percent returns it to the zone that framed the whole of October.
Two near term tests decide whether the move extends. This morning’s core PCE print is the inflation reading Warsh said the committee is waiting on, and next week’s quarterly refunding sets the supply the long end must absorb at these levels.