Treasury yields fell on Wednesday, coming off recent highs as traders await the Federal Reserve’s decision on interest rate hikes.
The benchmark 10-year Treasury yield last stood at 3.536%, down 3 basis points. Meanwhile, the policy-sensitive 2-year Treasury declined about 2 basis points, last trading at 3.948%. Both Treasuries hit highs on Tuesday, rising to levels last seen in 2011 and 2007, respectively.
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Yields and prices move in opposite directions and one basis point is equal to 0.01%.
The Federal Reserve is expected to announce interest rate hikes aimed at reining in inflation on Wednesday at the close of its September meeting. Broadly speaking, analysts expect a 75 basis point hike, but some believe the central bank will go beyond this to 100 basis points. That would mark the biggest interest rate hike in 40 years.
But even that may not be enough, Michael Schumacher, head of macro strategy at Wells Fargo Securities, told CNBC’s “Fast Money,” explaining that while he expects a 75 basis point increase, he would advocate a 150 basis point increase. As the. he believes rates are headed even higher.
Treasury bonds could also be a source of safety for investors, he added. “On the security side, I would look at the front end of the US Treasury curve. You have the 2-year Treasury yielding only about 4%. It’s gone up tremendously,” he said. “If you think about real yield, which a lot of people in the bond market focus on, that’s probably not a bad place to hide.”
Before investors and traders hear from the Federal Reserve, they will get more information on the housing market as August home sales data is released.