10-year Treasury yield slip further after Fed’s ‘big shift’

The 10-year Treasury note yield slipped further on Monday, as the final full trading week of 2023 gets underway.

Traders continue to digest the unexpectedly dovish tone of the U.S. Federal Reserve last week. The central bank held its key interest rate steady and revealed that policymakers were penciling in at least three rate cuts next year — marking a more aggressive series of cuts than what was previously hinted. 

The yield on the 10-year Treasury was marginally lower at 3.913%. Last Thursday, the yield fell below the 4% level, hitting its lowest since July.

The 2-year Treasury yield eased by 3 basis points to 4.423%, below the closely watched 4.5% level.

Yields and prices move in opposite directions. One basis point equals 0.01%.

Deutsche Bank strategists on Monday described the Fed’s move as a “big shift” from the higher-for-longer narrative.

“But the big question is now when these rate cuts might happen, and on Friday we had some mild pushback from Fed officials against the market excitement,” they said in an early note.

It comes after New York Fed President John Williams told CNBC’s Steve Liesman on Friday: “We aren’t really talking about rate cuts right now.”

“Meanwhile, Atlanta Fed President Bostic said ‘I’m not really feeling that this is an imminent thing’, and that they wouldn’t need to cut rates until Q3. So markets actually lost a bit of momentum on Friday,” the Deutsche strategists added.

U.S. stock futures rose on Monday morning.

Housing market index results are due to be released on Monday, and two U.S. Treasury auctions will take place: one of 13-week bills and another of 26-week bills.