U.S. Treasury yields fell on Wednesday after the Federal Reserve cut interest rates for the third time in 2019, even as the official scorecard of the economy’s health in the third-quarter showed that U.S. growth was maintaining a steady but slowing trajectory.
What are Treasurys doing?
The 10-year Treasury note yield TMUBMUSD10Y, -1.48%[1] slipped 3.9 basis points to 1.796%, while the 2-year note rate TMUBMUSD02Y, -0.23%[2] was down 1.4 basis points to 1.628%. The 30-year bond yield TMUBMUSD30Y, -2.09%[3] fell a steeper 5.2 basis points to 2.279%.
What’s driving Treasurys?
The rate-setting Federal Open Market Committee lowered its benchmark fed-funds rate by a quarter percentage point to a range between 1.50% to 1.75%. Two FOMC members, Boston Fed President Eric Rosengren and Kansas Fed President Esther George, dissented on the rate cut, preferring to see monetary policy stay on hold, as they voted last September.
In its policy statement, the Fed said it would “continue to monitor the implications of incoming information for the economic outlook as it assesses the appropriate path of the target range for the fed-funds rate.” Investors said this may be an indication that the Fed won’t pre-commit to further interest rate changes.
Read: Why one Fed watcher says the central bank needs to keep chopping interest rates[4]
U.S. gross domestic product expanded at an annualized pace of 1.9% in the third quarter[5], above the forecast from MarketWatch polled analysts of 1.6%, down from 2% between April to June. The GDP numbers reflected a sharp cutback in business investment due to uncertainty about international trade policy, but healthy consumer spending and a strong jobs market has helped offset these concerns.
In other economic data, Automatic Data Processing said the U.S. economy added 125,000 private-sector jobs[6], ahead of the U.S. Labor Department payrolls and unemployment report on Friday.
“Things may not be as great as they were a few months ago, but nothing in this data is suggesting that a recession is near either,” wrote Kevin Giddis, chief fixed income strategist at Raymond James.
See: Three things to watch from the Fed meeting[7]
On trade, Chile canceled the Asia-Pacific Economic Cooperation summit in mid-November [8]amid protests in the country over inequality. President Donald Trump and Chinese President Xi Jinping had been planning to meet in Chile, where it had been anticipated they would sign the so-called “phase one” trade deal....