US Treasuries mixed as FOMC leaves interest rate unchanged; signals delay in rate hike

The US Treasuries traded mixed on Thursday, following the release of the July FOMC statement that noted diminished risk for the economic outlook, highlighted by modest downward pressure in the short-end contrasted by further buying in the long end.

Although the statement stopped well short of signalling any intentions to raise rates in the near-term, it went far in the direction of undermining concerns following the UK Brexit decision that many saw keeping the Fed on hold for the foreseeable future.

The yield on the benchmark 10-year Treasury note fell nearly 1 basis points to 1.505 percent, the yield on 5-year note rose 1 basis point to 0.830 percent and the yield on short-term 2-year note fell ½ basis points to 0.726 percent by 12:30 GMT.

Moreover, the Federal Reserve Open Market Committee maintained a hawkish tone at the monetary policy meeting held Wednesday, while keeping the Federal Funds Rate unchanged. However, the Fed’s statement kept hopes alive for a rate cut in the future.

The central bank left the target range for the benchmark federal funds rate unchanged at 0.2-0.50 percent, a level since last December, when rates were hiked for the first time in seven years. The Fed mentioned that mounting risks to the US economy have subsided after the Brexit outcome and the labour market is showing signs of improvement.

The FOMC statement further mentioned that besides the job market, household spending has also started to improve and that economic activity has been expanding at a moderate rate; however, business conditions remain on a soft spree, the committee noted.

While, Fed Chairwoman Janet Yellen has repeatedly mentioned intentions of a gradual Fed rate hike, market volatility and the unexpected dip in job gains have upset the cause.

Meanwhile, the S&P 500 Futures trading up 2 points at 2,159 by 12:50 GMT.