Treasuries fell, pushing five-year yields to a one-year high, after the Federal Reserve maintained guidance to keep interest rates low for a “considerable time” and raised its estimate of the target rate for overnight loans between banks for 2015.
The difference between yields on two- and 30-year Treasuries narrowed from a one-month high as officials increased their median estimate for the federal funds rate at the end of 2015 to 1.375 percent, compared with 1.125 percent in June. Policy makers decreased the monthly pace of debt purchases by $10 billion for the seventh consecutive meeting, with the intention of ending them after October.
“The Fed is certainly moving forward with plans to normalize interest rates,” said Kathy Jones, a fixed-income strategist at Charles Schwab & Co. in New York. “The median estimate for the fed fund’s rate at the end of 2015 has edged up. That’s a pretty decent move up.”