The Federal Reserve cuts interest rates by 0.25%, treasury yields plummet, and short-term bonds experience a wider decline.

Source: BlockMedia Original Title: [New York Bonds] ‘No Rate Hike’… US Treasury Yields Plunge… Short-term Yields Expand Drop Original Link: As the Federal Reserve(Fed and the Federal Reserve) lowered the benchmark interest rate by 0.25 percentage points, U.S. Treasury yields declined across the board. Chairman Jerome Powell’s dismissal of the possibility of future rate hikes and emphasis on maintaining an accommodative stance drove the decline in yields.

In the U.S. Treasury market, the 10-year yield fell 4.3bp from the previous trading day to 4.155%. It briefly rose to 4.209% during the session, reaching a three-month high, but retreated immediately after the Fed’s announcement. This marks the end of a four-day consecutive increase and halts the longest upward trend over the past five weeks.

The Fed cut the benchmark rate as expected by 0.25%. Notably, while the dot plot still shows only one additional rate cut projected for 2026, concerns about economic slowdown were reflected in the market, citing weakness in the labor market as a key reason for potential rate reductions. In a press conference, Powell stated, “A rate hike at the next meeting is not the base case,” effectively excluding the possibility of tightening.

As a result, short-term yields responded quickly. The 2-year Treasury yield plummeted 7.3bp to 3.54%, marking the largest single-day decline since mid-October. This reflects the sensitivity of short-term instruments to the Fed’s policy rate outlook.

The 30-year Treasury yield also decreased by 2.1bp to 4.788%. The stabilization of long-term yields is attributed to the successful completion of recent 3-year and 10-year Treasury auctions amid healthy demand. A $30 billion 30-year Treasury auction is scheduled for the 11th, attracting market attention to supply and demand conditions.

The 2-year–10-year spread, which indicates the difference between short- and long-term yields, widened to 60.1bp, reaching its highest level since September. This suggests that while the market is pricing in the possibility of a mid- to long-term economic slowdown, expectations for short-term policy easing remain elevated.

In the TIPS market, the 5-year breakeven inflation rate(, representing the market’s expected average inflation over the next five years, edged down slightly from 2.332% to 2.326%. The 10-year breakeven inflation rate stood at 2.268%, indicating that the market expects average inflation to be around 2.3% over the next decade.