Yields rise as traders reverse reaction to Fed decision

New York (Mar 16)  US Treasury yields rose on Thursday from more than one-week lows on the view that they had fallen too sharply in the prior session after the Federal

Reserve maintained its outlook for only a gradual pace of interest rate increases this year.

    The Fed, which as expected raised rates for the second time

in three months on Wednesday, said in its policy statement that

further rate increases would be "gradual." Officials stuck to

their outlook for two more rate hikes this year and three more

in 2018.

    Wall Street's top banks also see just two additional rate

rises this year from the U.S. central bank, and most expect at

least three more in 2018, a Reuters poll showed on Wednesday.

    While disappointment with the Fed's outlook pushed yields

lower in a knee-jerk reaction on Wednesday, that sentiment

dissipated on Thursday.

    "Today is kind of a rebound back to reality," said bond

strategist Stan Shipley of Evercore ISI in New York.

    Shipley said the number of future hikes that the Fed expects

could still put upward pressure on Treasury yields as inflation

also rises.

    "With accelerated inflation and Fed tightening, 10-year

Treasury yields are going to go through that 2.60 (percent)

ceiling sometime in the next month or so," he said.

    Benchmark 10-year Treasury notes were last down

7/32 in price, with yields rising to 2.531 percent from 2.504

percent late on Wednesday. Benchmark yields extended Wednesday's

decline in overnight trading to hit a 10-day low of 2.486

percent.