Treasury yields tick higher as the Fed says it sees inflation picking up

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  • The Federal Open Market Committee held its key interest rate in a range between 1.25% and 1.50%.
  • The central bank sees inflation hitting its 2% target over the medium term.
  • The 10-year yield briefly ticked above 2.75% for the first time since April 2014.

US Treasury yields are hitting session highs after the Federal Reserve held its benchmark interest rate in a range between 1.25% and 1.50% and suggested inflation would hit its 2% target over the medium term.

“The Committee expects that, with further gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace and labor market conditions will remain strong,” the statement said. “Inflation on a 12‑month basis is expected to move up this year and to stabilize around the Committee’s 2 percent objective over the medium term.”

Post-announcement selling is having the biggest impact on the belly of the curve, with yields there up about 4 basis points apiece. Here’s a look at the scoreboard as of 2:20 p.m. ET:

  • 2-year +2.8 bps @ 2.153%
  • 3-year +3.9 bps @ 2.300%
  • 5-year +4.2 bps @ 2.548%
  • 7-year +3.7 bps @ 2.687%
  • 10-year +2.8 bps @ 2.748%
  • 30-year unch @ 2.971%

Traders are paying close attention to the 10-year yield, which briefly ticked above 2.75% for the first time since April 2014. The benchmark yield has rallied more than 30 bps so far in 2018. That selling has caught the interest of many traders, who believe further upward pressure on yields could eventually weigh on the stock market.

Wednesday’s selling has caused slight flattening along the yield curve, with the 2-10-year spread trading near 59 bps. It’s just a handful of basis points away from being the flattest its been since the fall of 2007.