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U.S. Treasury yields and the U.S. dollar continued their joint rally following the Federal Reserve's rate hike.
Assets sensitive to monetary policy are collectively betting on "prolonged tightening."
On the 16th local time, the Dollar Index (DXY), which measures the value of the dollar against six major currencies, hovered around the 99.5 range before the Federal Open Market Committee (FOMC) announcement. Immediately following the Fed's decision, it jumped 0.6 points to 100.21, setting a new high since July 31.
The upward trend continued thereafter, rising 0.7 points from the previous session (99.61) to 100.32 as of 6:00 p.m.
Scotiabank told Reuters, "The swap market is reflecting over 0.90 percentage points of additional tightening through next summer," pointing to this interest rate path outlook itself as the background for the dollar's strength. TD Securities also noted, "If the dot plot leaves open the possibility of an additional hike in October, the dollar's strength could extend further."
The yield on the benchmark 10-year U.S. Treasury note rose 0.031 percentage points to 5.027% around the close of regular trading at 5:00 p.m.
This level matches the peak first touched during intraday trading on the 15th, a day before the FOMC meeting. After briefly paring losses immediately following the rate hike announcement on the 16th, yields climbed back up to the 5% threshold when Chair Washington repeatedly emphasized inflation risks.
The 2-year Treasury yield, which reacts sensitively to monetary policy, rose 0.075 percentage points from the previous session to 4.736% on this day, moving within a hair's breadth of its 52-week high (4.742%).
In contrast, the 30-year Treasury yield edged up just 0.01 percentage points from the previous session to 5.361%.
Jonathan Shugar of Goldman Sachs remarked, "Long-term yields are currently one of the biggest risks in the market," citing fiscal deficits and increased government bond issuance driven by AI infrastructure as the background.
(Photo: AP, Yonhap News)
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