Treasuries stage biggest rally since May as Fed looks on hold for 2019

Treasuries staged a muscular rally on Wednesday after the Federal Reserve flagged it would refrain from raising interest rates in 2019 and announced plans to end the reduction of its balance sheet.

Yield on the benchmark 10-year US Treasury dropped as much as 8.6 basis points to a 14-month low of 2.5263 per cent. Yields were down 7 bps at pixel time in what stood as the biggest drop in yields since May 2018. The yield had been down 2.1 basis points beforehand.

The yield on the more policy-sensitive two-year Treasury was down 6.5 basis points at 2.4044 per cent.

Equities quickly trimmed their declines from earlier in the day, pulling the broader market into positive territory. The S&P 500 was up 0.3 per cent to 2,840, having been down about ½ of 1 per cent just before the Fed’s policy statement was released. The Nasdaq Composite also swung positive, putting it up 0.6 per cent.

The news was taken more poorly by the dollar, which swung into negative territory on the announcement. The DXY index, which tracks the greenback against a weighted basket of global currencies, was down 0.6 per cent at 95.822 following the release of the Fed statement, having been up 0.1 per cent beforehand.

Emerging market currencies ripped higher against the dollar. The Mexican peso was up over 1 per cent at 18.82 after having traded 0.1 per cent lower. The Brazilian real firmed 0.8 per cent to 3.757 per greenback. It had been down by as much as 0.2 per cent earlier. The wider JPMorgan EM currency index gained 0.7 per cent.

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Gold was also boosted by the dovish Fed statement. The yellow metal reversed a 0.6 per cent decline to trade up by a similar margin at $1,313.44 per troy ounce


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