US Treasury yields fall sharply

FXStreet (Mumbai) - The Treasury yields in the US fell sharply, with the yields on the short duration treasury notes leading the way lower after the Fed revised end 2015 interest rate expectations significantly lower, along with the downward revision of the GDP forecasts.

Short-end yields tank

The two-year yield, which mimics the short-term interest rate expectations, is now down 8.5 basis points (bps) to 0.585%, while the 1-year yield is down 5.5 bps to 0.205%. The sharp decline at the short end was triggered by Fed revising its end 2015 median interest rate forecast lower to 0.625% from the earlier forecast of 1.125%.

Meanwhile, the 10-year yield now trades lower by 7.3 bps to 1.986%, while the 30-year yield trades 4.9 basis points lower at 2.567%. The yields were also hit by the downward revision of the GDP and inflation forecasts. The Fed revised its 2015 GDP forecast lower to 2.3%-2.7% from the earlier forecast of 2.6%-3.00%, while Core PCE inflation was revised lower to 1.3%-1.4% from the previous forecast of 1.5%-1.8%.