10-year Treasury yield drops below 4% mark as investors digest Fed rate outlook

Treasury yields fell on Thursday as investors digested guidance issued by the Federal Reserve about the outlook for interest rates as its final policy meeting of the year concluded Wednesday.

At 4:34 a.m. ET, the yield on the 10-year Treasury was down by over nine basis points to 3.9357%, below the 4% mark. It was last seen at similar levels in early August.

The 2-year Treasury yield was last more than 18 basis points lower at 4.2922%. It had fallen by as many as 25 basis points on Wednesday.

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

Treasury yields first tumbled on Wednesday as the Federal Reserve’s latest policy meeting ended with interest rates being left unchanged, which was in line with expectations, and fresh guidance the path ahead for interest rates being issued.

The central bank indicated that three rate cuts could be implemented next year. Further cuts are then expected throughout 2025 and 2026, which would put the fed funds rate in the 2% to 2.25% range.

The Fed also lowered its inflation forecast for next year from 2.6% to 2.4%. Earlier in the week, the consumer price index showed that prices had increased by 3.1% on an annual basis in November.

“Inflation has eased from its highs, and this has come without a significant increase in unemployment. That’s very good news,” Fed Chair Jerome Powell said in a post-meeting press conference.

On Thursday, investors will be watching the release of November retail sales, as well as import and export prices and the latest weekly initial jobless claims figures.

Elsewhere, the European Central Bank and Bank of England are set to announce interest rate decisions.