The Federal Reserve hikes to 4% with the 10-year yield at 5%
- US 10-year yield drops to 4.94% on the Fed decision and takes it straight back
- Fed's rate rises to 3.75-4.00%, its first increase in more than three years
The Fed has raised its rate to 3.75-4.00%, its first increase since 2023 and its first move since the cut in December 2025. The rate it controls is the overnight one. Everything further out is set by people buying and selling bonds, and they have been selling. The 10-year yield was above 5% this morning, its highest since 2007, and the 30-year sits above 5.3%. Those are the yields that price mortgages, corporate debt and most of what American companies and households pay to borrow. The vote was 12-0, and the statement left the balance sheet alone, with bank reserves staying ample. The bond market raised long rates weeks ago. The committee got to the overnight rate this afternoon.
The yield fell to just under 4.94% on the release, the low of the day, and reversed inside the same five-minute bar to near 4.97%. It sits near 4.96%, which is where it sat going into 18:00 GMT, so the entire move round-tripped inside five minutes. That is about 0.05 of a point below the day's high just above 5.00%, made earlier in the session and given back steadily since. The five-minute momentum gauge reads near 27, close to the bottom of its range, where it has been for most of the last hour.
10-year Treasury yield 5-minute chart
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
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