U.S. Government Bonds Hold Steady After Fed Decision

U.S. government bond-prices pared gains Wednesday after the Federal Reserve cut interest rates for the first time in roughly 11 years.

In recent trading, the yield on the benchmark 10-year U.S. Treasury note was 2.037%, according to Tradeweb, compared with 2.063% Tuesday.

Yields, which fall when bond prices rise, declined early in the session after a report said the Chicago Purchasing Managers Index fell deeper into contraction territory in July. The index slipped to 44.4, compared with 49.7 in June and a 50.5 reading anticipated by economists surveyed by The Wall Street Journal.

The reading is based on a survey of purchasing managers in the Chicago area who are asked, among other things, whether new orders, production and employment increased, decreased or stayed the same during the month.

Fed Chairman Jerome Powell, pictured earlier this month, is scheduled to speak to reporters Wednesday.


Christophe Morin/Bloomberg News

The report came hours before the Fed reduced its benchmark interest rate by 0.25 percentage point, in its first interest rate cut since 2008.

Because a rate cut was expected, the market’s reaction to the Fed’s statement and subsequent press conference by Fed Chairman Jerome Powell could be mostly based on what they indicate about the central bank’s future plans, investors and analysts say.

Signs that the Fed may not cut rates again in 2019 could push up yields on short-term Treasurys, which are particularly sensitive to changes in monetary policy. The yield on the two-year Treasury, which often moves with expectations for central bank policy, rose to a recent 1.854% from around 1.812% before the announcement.

Write to Sam Goldfarb at sam.goldfarb@wsj.com

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