US 10-year treasury yield drops below 2%

The yield on the 10-year US Treasury note fell below 2% soon before press time to hit the lowest level since November 2016. 

The four basis point drops could be associated with the US Federal Reserve's decision to keep rates steady but signal a shift to a more dovish stance. On Wednesday, the US central bank pointed to possible interest rate cuts in the future, citing rising “uncertainties” about the economic outlook.

The Fed said it would “act as appropriate to sustain the expansion” and would “closely monitor the implications of incoming information for the economic outlook”.

Chairman Powell, while speaking at the policy presser, said that the case for additional accommodation and uncertainty surrounding the baseline outlook have increased since the last meeting. 

The dot plots showed the Fed is unlikely to cut rates this year. Even so, the yields are on the retreat and the money markets have priced in 100% probability of a rate cut in July. It appears the Fed's decision to remove the word "patience" from the forward guidance on interest rates has been taken a sign the bank is ready to act if necessary. 

As of writing, the yield is trading at 2% – down 18 basis points on a month-to-date basis and 81 basis points on a year-to-date basis.