U.S. Treasuries plunge after Fed keeps interest rate outlook unchanged; eyes on November retail sales

The U.S. Treasuries plunged Thursday after the Federal Reserve kept its interest rates outlook unchanged in its last monetary policy meeting of this year concluded yesterday. Also, investors are keenly eyeing the country’s retail sales for the month of November, scheduled to be released today by 13:30GMT, which will add further direction to the debt market.

The yield on the benchmark 10-year Treasuries jumped 3 basis points to 2.37 percent, the super-long 30-year bond yields climbed nearly 1-1/2 basis points to 2.74 percent and the yield on the short-term 2-year traded 3 basis points higher at 1.81 percent by 10:20GMT.

As expected by everyone, the Fed hiked the target range by 25bp to 1.25-1.50 percent. In line with market expectations, the median dots still signal three hikes in 2018 and slightly more than two in 2019. The longer-run dot was unchanged at 2.75 percent. Kashkari and Evans, two well-known doves, voted against the hike, but both are losing their voting rights next year. Looking at the statement, there were no major changes.

The Fed still says that it is monitoring inflation ‘closely’. The Fed said it will stop commenting on the balance sheet reduction at every meeting and it will just run in the background unless something happens.

"We expect two to three hikes next year with two hikes being our base case (June and December). The consensus among economists is three hikes, in line with the Fed’s dot plot. Markets have priced in nearly two hikes next year," Danske Bank commented in its latest research report.

Meanwhile, the S&P 500 Futures traded 0.10 percent higher at 2,671.50 by 10:45GMT, while at 10:00GMT, the FxWirePro's Hourly Dollar Strength Index remained slightly bearish at -93.46 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex

FxWirePro launches Absolute Return Managed Program. For more details, visit http://www.fxwirepro.com/invest