10-Year Treasury Yield Holds Near 5% After Fed Rate Hike

The 10-year Treasury note yield traded near the key 5% mark after a Federal Reserve rate increase and comments from Chairman Kevin Warsh highlighting persistent inflation risks.

The benchmark yield was down 1 basis point on the day, though remained at 4.983%. The 2-year Treasury note yield was last up nearly 4 basis points at 4.42% — erasing an earlier decline.

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

The Fed hiked rates for the first time in three years. Its overnight lending rate now sits in a 3.75%-4% range, up from 3.5%-3.75%.

"Inflation remains elevated. Today's policy action will support a timelier return to the Committee's 2 percent goal," the Fed's policymaking committee said in a statement.

Wednesday's announcement comes after a sharp rise in oil prices, driven by escalations in the U.S.-Iran war. Those high energy prices have begun showing up in recent inflation reports, including the August consumer price index figures.

"This summer's inflation readings do not tell me that underlying trends have meaningfully improved," Fed chief Warsh told reporters. "Inflation is too high and has been for too long."

The hot inflation data has put pressure on the long end of the Treasury curve in recent weeks, pushing the 10-year Treasury yield to a 2007 high on Tuesday.

"The Fed has signaled it does not at this stage envisage an aggressive tightening cycle," said Kay Haigh, global head and CIO of fixed income and liquidity solutions at Goldman Sachs Asset Management. "Most FOMC members see a total of two hikes this year per the SEP, and it will likely skip October's meeting given its proximity to the midterm elections. One more hike this year in December is our base case, although this remains contingent on upcoming CPI reports and the path of energy prices."