U.S. Treasury futures experienced a significant drop, reaching intraday lows following the Federal Reserve's decision to maintain its benchmark interest rate within the target range of 4.25%-4.5%. The policy statement included revised language regarding inflation and employment, which the market interpreted as hawkish.
The yield curve flattened as Treasury yields increased across the board by 3-4 basis points, causing the 5s30s yield spread to hit its lowest point of the day after the statement's release.
Overnight index swaps (OIS) pricing indicated a reduction in the expected rate cut for the March policy meeting, now estimated at about 5 basis points, down from 7 basis points earlier. Additionally, the anticipated overall rate cut by the end of the year has been adjusted to approximately 43 basis points, from a previous expectation of 48 basis points.
