U.S. Treasury yields held steady on Wednesday as investors awaited the Federal Reserve’s interest rate decision and monetary policy outlook.
The 10-year Treasury yield was down less than one basis point at 4.02%, and the 2-year Treasury yield also dipped less than one basis point to 3.507%, Meanwhile, the 30-year Treasury was little changed at 4.639%.
One basis point is equal to 0.01%, and yields and prices move in opposite directions.
Traders are pricing in a 100% chance that the Fed will lower its interest rates, according to the CME FedWatch Tool. Such a step could give a boost to the health of the U.S. economy as the labor market continues to slow and inflation stays above the central bank’s 2% target.
The Fed will also share further insight on the outlook for rates for the next 12 months in the central bank’s quarterly Summary of Economic Projections, accompanied by a dot-plot grid which will show where rates may be in the next year.
Paul McCulley, former managing director at Pimco said on CNBC’s “The Exchange” on Tuesday that a quarter-point rate cut is the widely expected outcome of the Federal Open Market Committee’s meeting.
“Quite frankly, I don’t know how I would explain [a half-point cut] in the current context without saying the labor market really is worrying me intensely, and I don’t think that’s the message that Chair Powell wants to communicate — at least not now,” McCulley said.
Investors will also keep an eye out for other economic data, including preliminary building permits and housing starts for August due out on Wednesday. The weekly initial jobless claims report will be released on Thursday.