New projections showed policymakers at the median expected rates to stay within the new range through 2020. However, in a sign of ongoing divisions within the Fed, seven of 17 policymakers projected one more quarter-point rate cut in 2019. "The market's interpreting it incrementally a bit hawkish," said Jon Hill, an interest rate strategist at BMO Capital Markets in New York. "The fact that they don't indicate any additional cuts we'll take with a grain of salt. Keep in mind that back in June there was no indication they were going to cut the rest of this year either, and really the language in the statement remains that they will act as appropriate," Hill added.
Two-year yields rose to 1.758%, from, 1.680% before the Fed statement. Benchmark 10-year yields increased to 1.793%, from 1.750%. The yield curve between two-year and 10-year notes flattened to three basis points, from seven basis points before the Fed statement. The US central bank also lowered the interest it pays on excess bank reserves (IOER) by 30 basis points to 1.80%, after turmoil in the short-term funding markets this week briefly pushed the overnight bank-to-bank lending rates above the US central bank's target range.
In the press conference following the interest rate decision, Chairman Jerome Powell said the Fed will conduct repurchase operations as needed to keep the rate within its target range. The New York Federal Reserve on Wednesday accepted $75.0 billion in bids, the maximum available, from primary dealers at an emergency repurchase agreement operation.
Earlier, ongoing concerns about last weekend's attack on Saudi Arabian crude oil facilities provided a safety bid for US bonds. US President Donald Trump said on Wednesday there were many options short of war with Iran after Saudi Arabia displayed remnants of drones and missiles it said were used in the attack that was "unquestionably sponsored" by Tehran. Concerns about a spike in oil prices harming the economy, however, have eased since Saudi Arabia's energy minister said on Tuesday that the kingdom will restore its lost oil production by the end of September.