The return on the benchmark portfolio 10-year government bond maturity at its lowest level since January 2018 after the US Federal Reserve said it is no longer likely to raise prices again this year.
The Fed on Wednesday downgraded its economic forecast and said it plans to close its program to reduce the bonds it holds on its balance sheet in six months, a process closely followed by fixed-income traders all over the world. that in May it will begin to reduce the amount of proceeds that it allows to roll off the balance every month.
"It seems the Fed should not l do something in 2019. The dots tell the market that they will not go in 2019, "said Tom di Galoma, head of treasury trading at Seaport Global Holdings. "It looks like it's out of the table and we're looking at some relief if the economy continues to fall."
In December, Fed committee members estimated that two interest rate increases would be appropriate in 2019 after four increases in 2018. They also pointed out at least one other before completing a round of policy tightening that began in December 2015.
With global economic growth appearing to slow, most market participants expect US central bank and chairman Jerome Powell to take a cautious tone both in release and during a press conference at 2.30 ET. The Federal Reserve is also expected to lower interest rate forecasts – or "dot plots" – for the rest of the year.
Fed said in the January meeting that it will be "patient" and data dependent when deciding to raise interest rates in the future.
In a separate issue earlier this year, Federal Open Market Committee members also mentioned the reduction in the central bank's balance sheet. The committee issued a separate three-point statement that noted that "it is appropriate to provide further information on its plans to conduct monetary policy in the long run."