By Joseph Adinolfi, MarketWatch
NEW YORK (MarketWatch)--U.S. Treasury yields finished the day
higher Thursday for the second consecutive session a day after
Federal Reserve Chairwoman Janet Yellen reassured markets that,
once the Fed begins raising interest rates, it would be careful to
do so gradually.
Ten-year and 30-year Treasury yields rose to their highest
levels in two weeks. The 10-year rose 5.6 basis points to 2.206%
(10_YEAR) while the 30-year yield (30_YEAR) was up 6.4 basis points
at 2.815%. The five-year yield gained 4.5 basis points to 1.663%.
The two-year (2_YEAR) yield rose 2.4 basis points to 0.637%,
according to data from Tradeweb.
Bond yields rise as prices fall.
Before Yellen's news conference, the Fed's monetary policy
statement confounded the market's expectations by appearing
slightly more dovish than the market expected, analysts said. The
Fed modified its guidance, adding that the Fed would be "patient"
about raising rates to language saying rates would remain near zero
"for a considerable time."
During the question-and-answer session, Yellen adopted a hawkish
tone, saying that the Fed wouldn't begin raising rates for "at
least the next couple of meetings," according to several analysts,
including Camilla Sutton, chief FX strategist at Scotiabank.
U.S. stocks moved higher for a second session Thursday, after
recording their best session of 2014 on Wednesday and ending a
monthlong stretch of risk-averse trading. The Dow Jones Industrial
Average (DJI) gained 421.28 points, or 2.43%, its biggest one-day
percentage gain since December 2011. This marks the first time in
six years that the index has gained more than 200 points for two
straight sessions.
Donald Ellenberger, senior portfolio manager and head of
multi-sector strategies at Federated Investors, said this is a sign
that the market trusts that the Fed will be careful to hike rates
gradually.
"Yellen's statement had something in it for everyone, but the
one thing you can take out of the market's reaction, it seemed to
be 'risk on,' " Ellenberger said.
The conference followed the Federal Open Market Committee's
two-day December monetary policy meeting, which ended Wednesday
afternoon. The Fed won't meet again until Jan. 28.
Here's what bond investors were watching Thursday:
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