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Bond Report: Treasury yields drop as investors brace for Fed rate hike

Treasury yields shot higher on Wednesday after the Federal Reserve raised interest rates for only the second time in a decade, briefly sending the two-year yield above 1.25% for the first time since the summer of 2009.

Market strategists and investors had almost universally expected the Fed to raise interest rates on Wednesday, though there had been some debate about how hawkish the Fed’s economic projections, released concurrently with the rate decision, might be.

“The two-year has hit its highest level since 2009 and it appears as though the Fed will move more aggressively to tighten rates in 2017 than previously thought,” said Tom di Galoma, managing director for Treasury trading at Seaport Global.

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