in a statement
pushed back against investor expectations that it was ready to flag the end of its
tightening cycle.
"The (Federal Open Market) Committee anticipates that ongoing increases in the target range will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2% over time," the Fed said.
"The big point is what remains, and that is the word 'ongoing,'" said Russell Price,
chief economist at Ameriprise Financial in Troy, Michigan.
"The Fed expects 'ongoing' rate increases to address the inflation problem," Price said. "That implies more than just one rate hike yet to come. It was really that word that people are concentrating on."
Yields on the two-year Treasury note, which often reflect interest rate expectations,
rose 2.7 basis points to
4.234 % as yields on longer-dated securities fell.
The yield on the benchmark 10-year note fell 3.9 basis points to
3.490
%.
U.S. private payrolls increased far less than expected in January, the ADP National Employment report showed, while U.S. manufacturing contracted further last month, the Institute for Supply Management (ISM) said in a separate report. "There's hope that the Fed statement will be dovish. ADP was weaker than expected, which plays into the (market's) dovish message," Stan Shipley, market strategist at Evercore ISI, said before the statement's release. But other data showed a resilient labor market, bolstering arguments the Fed will raise rates to above 5% as officials have projected and keep them there into next year.
U.S. job openings unexpectedly rose in December, showing demand for labor remains strong, the Labor Department said in its monthly Job Openings and Labor Turnover Survey, or JOLTS report, and ISM data suggested factories did not appear to be laying off workers in large numbers. Fed fund futures rose after the state, with the market pricing a peak overnight rate of 4.935% in June. But futures showed that rate declining to 4.503% in December on expectations the Fed cuts rates in the second half of 2023. The yield on the 30-year Treasury bond was down 5.3 basis points to 3.608%.
Bond yields move in the opposite direction to prices. The yield curve measuring the gap between yields on two- and 10-year notes , seen as a recession harbinger when the shorter-dated yields are higher than longer-dated maturities, remained inverted at -74.8 basis points.
Feb. 1 Wednesday 2:25 p.m. New York / 1925 GMT
Price Current Net
Yield % Change
(bps)
Three-month bills 4.5625 4.6798 -0.013
Six-month bills 4.6575 4.8361 0.003
Two-year note 99-202/256 4.2363 0.029
Three-year note 99-230/256 3.9112 -0.003
Five-year note 99-124/256 3.6137 -0.022
Seven-year note 99-168/256 3.5559 -0.036
10-year note 105-56/256 3.4901 -0.039
20-year bond 103-164/256 3.7377 -0.049
30-year bond 107-28/256 3.6083 -0.053
DOLLAR SWAP SPREADS
Last (bps) Net
Change
(bps)
U.S. 2-year dollar swap spread 27.25 -1.25
U.S. 3-year dollar swap spread 14.50 0.25
U.S. 5-year dollar swap spread 6.00 0.50
U.S. 10-year dollar swap spread -2.25 0.25
U.S. 30-year dollar swap spread -38.50 0.75
(Reporting by Herbert Lash, additional reporting by David Randall; editing by Barbara Lewis,
Sharon Singleton and Jonathan Oatis)
