Treasuries Move To The Upside On The Heels Of Fed Announcement

(RTTNews) - Treasuries moved moderately higher over the course of the trading day on Wednesday, partly offsetting the drop seen in the previous session.

After moving modestly higher in early trading, bond prices saw some further upside following the Federal Reserve's monetary policy announcement. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 4.2 basis points to 2.613 percent.

The strength among treasuries partly reflected a positive reaction to the announcement from the Fed, which was largely in line with expectations.

As was widely expected, the Fed announced its decision to reduce the pace of its asset purchases by another $10 billion to $35 billion per month.

Paul Ashworth, Chief U.S. Economist at Capital Economics, said, "Despite the extent of the contraction in first-quarter GDP, the falling unemployment rate and pick-up in inflation persuaded the Fed to stick to its existing plan."

While the weak first quarter led the Fed to lower its outlook for GDP growth in 2014, the central bank noted that growth in economic activity has rebounded in recent months.

Despite recent indications of rising prices, the Fed also said inflation has been running below the committee's longer-run objective.

In the subsequent press conference, Fed Chair Janet Yellen acknowledged that recent inflation data has been on "the high side" but also described the data as "noisy."

With the Fed announcement and Yellen's press conference coming late in the trading day, trading on Thursday may continue to be impacted by reaction to the news.

Traders are also likely to keep an eye on the release of reports on weekly jobless claims, leading economic indicators, and Philadelphia-area manufacturing activity.