Long-term Treasury yields fell the next day after the Fed signalled that it might start tightening monetary policy earlier, helping to reduce the risk that inflation expectations could spiral out of control.
The yield on the 30-year note fell to 2.07% on Thursday, its lowest level since Feb. 19. The Fed forecast two interest rate hikes by the end of 2023, curbing short-term bond prices. The yield curve flattened, with the spread between five-year and 30-year interest rates narrowing to their lowest level since November, at about 119 basis points.
Goldman SachsPraveen Korapaty, chief interest rate strategist, said in a report that the net outcome of the Fed's decision at Wednesday's meeting should be "enough to make the medium-to long-term yield curve tend to flatten when the data is better than expected."
