Key Highlights

● Long-term borrowing costs moved sharply higher after the Fed decision.

● The 10-year yield posted its largest daily gain in a month.

● Oil prices and strong growth data added to the pressure.

● The short end of the curve stayed comparatively steady.

Long-term borrowing costs moved sharply higher after the Federal Reserve left its benchmark rate range unchanged. The 10-year Treasury yield posted its largest daily gain in a month, pushing past a key psychological threshold, and the 30-year yield climbed alongside it, as the Fed held in a 10-2 vote with Governor Lisa Cook and Cleveland Fed President Beth Hammack dissenting in favor of a hike.

The statement said economic activity is expanding at a strong pace, while inflation remains elevated and language saying policy supports a return to the inflation goal was dropped.

Inflation Worries at the Long End

Long-dated yields are especially sensitive to inflation expectations, and oil prices, a key driver of inflation, were back above $100. Crude settled higher after Yemen's Houthis claimed a missile attack on a Saudi refinery, a claim Riyadh has not confirmed.

Growth is also running hot, with real-time growth tracking models pointing to the strongest quarterly pace in a year, and Fed Chair Kevin Warsh said capital investment is not just strong, but it is broadening.

Short End Stays Put

The rise was concentrated in longer maturities. The two-year yield spiked right after the decision but finished slightly lower, leaving the yield curve steeper. Traders lifted the odds of a December hike after the decision.

Higher long-term yields hit rate-sensitive assets, with utilities, real estate and consumer staples among the weakest S&P 500 sectors, and regional banks slipping, even as major indexes still finished higher, led by chipmakers.