Prices up on US bonds as Fed increases interest rates

Prices were up and yields down on US Treasury bonds on Wednesday, mostly on the Federal Reserve’s newest increase in the interest rate, which was announced on Tuesday.

In late morning trade, the 5-year bond was down by 1.1 basis point to a yield of 4.227 percent, while the 10-year bond had dropped 1.2 percent to yield 4.38 percent.

$13 billion in 5-year bonds were up for auction on Wednesday, and $13 billion in 10-year bonds are to be sold on Thursday. Monday’s auction of $18 billion in 3-year bonds attracted only mild attention from foreign central banks and institutional investors.

Prices were up and yields down on government bonds in the eurzone as well, but UK gilts saw prices decline.

In the eurozone, the 2-year Schatz was down 2.6 basis points to yield 2.321 percent, and the 10-year Bund dropped 2.5 basis points to a yield of 3.354 percent.

UK gilt prices fell as hope faded that UK interest rates would be cut again soon after the Bank of England issued a quarterly inflation report that was relatively optimistic about the state of future growth in the economy.

The 2-year gilt gained 3.3 basis points to yield 4.266 percent. Meanwhile in Japan, the 10-year government bond gained 2.5 basis points to yield 1.435 percent on indications of growth in the Japanese economy.

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