Bonds Sell Off after Release of Fed Minutes

by Marilou Moursund on February 21, 2018

in Bonds,Fed policy,interest rates

The yield on the 10 year Treasury jumped from 2.88% this morning to 2.96% this afternoon after the Federal Reserve released its minutes from the January meeting.  Fed officials increased their outlook for both growth and inflation in January.  From the linked Wall Street Journal article:

Fed officials late last month believed the economy was set to grow faster than they when they met in December, according to minutes of their Jan. 30-31 meeting, which were released on Wednesday.

After the December meeting, Congress approved tax cuts that were slightly larger than officials had anticipated. Stocks also rose to new highs in the month before the January meeting, likely giving an additional boost to economic growth, they thought.

Stock markets convulsed in the days following the January meeting. Economic reports hinted at rising wage and price pressures, fueling fears the Fed might raise rates faster than expected, and bond yields climbed to their highest levels in four years.

Also after the January meeting, Congress approved a larger-than-expected government spending plan, which has prompted more economists to project the Fed will need to raise rates slightly faster to ensure the economy stays on an even keel.

Officials had already marked up their growth projections when they met in mid-December because Congress was close to agreement on a $1.5 trillion tax cut package.

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