Treasury Yields Little Changed After Fed Meeting, Warsh's First as Chair

The 2-year Treasury note yield was relatively unchanged on Thursday after jumping Wednesday in reaction to the conclusion of Kevin Warsh's first meeting as chair of the Federal Reserve.

The 2-year yield, which more closely tracks short-term Federal Reserve interest rate policy, slipped less than 1 basis point to 4.155%. That follows an advance of more than 16 basis points on Wednesday — the biggest jump on a Fed meeting day since March 2008, according to MUFG.

The yield on the 10-year U.S. Treasury note — the key benchmark for mortgage lending, auto loans and credit card debt — dipped more than 3 basis points to 4.428%. The longer-dated 30-year Treasury bond yield fell more than 5 basis points to 4.871%.

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

Shorter-dated Treasuries continued to react to the Federal Reserve's June policy meeting.

Kevin Warsh's first gathering as Federal Reserve chairman ended Wednesday with a more hawkish bias toward interest rates from the 12 voting members of the Federal Open Market Committee, and a nod to possible future rate hikes. The meeting saw the committee remove key language from a dramatically shorter policy statement that had previously indicated a bias toward future rate cuts.

The Fed kept the benchmark federal funds rate unchanged at 3.5%-3.75%.

Complicating the picture was Warsh's decision to abstain from submitting a rate forecast. He confirmed at a news conference after the meeting that he had declined to share his own forecast, and would form five task forces to review major Fed operations.

"I did not submit a dot for me," Warsh said. "It's not helpful in the conduct of policy."

Market commentators were relieved Warsh's first address ran smoothly.

"What was interesting from Warsh's first FOMC outcome is a clear message to markets that the Federal Reserve sees inflation as an issue to be solved, and if they do identify an inflation problem, they are prepared to act," ING's rates analysts wrote in a note published Thursday.

"Not exactly what was expected when President Trump gave the job to Warsh. But it does add a proper layer of credibility to Warsh's FOMC," ING added.

Byron Anderson, head of fixed income at Laffer Tengler Investments, said the world is going "back in history to when markets react to the Fed and not the Fed reacting to markets."

Shorter-dated yields also took a leg lower Thursday after the release of the latest U.S. economic data.

Initial jobless claims for the week ended June 13 came in just above expectations at 226,000. That was a 4,000 increase from the previous week and above the 225,000 economists polled by Dow Jones were expecting. Additionally, the Philadelphia Fed manufacturing index jumped to 10.3 in June, rising from a minus 0.4 reading in May and above the consensus estimate of 9.8.

"The economy is facing no material downside risks at present so Fed policymakers can hold rates steady and do nothing," said Chris Rupkey, FWDBONDS chief economist.

— CNBC's Jeff Cox and Lisa Kailai Han also contributed to this report.