Key Highlights

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

● The 30-year yield also rose while the two-year eased.

● The yield curve steepened following the Fed's decision.

● Oil prices and economic data added to the pressure.

The stock market took the Federal Reserve's decision in stride, but the bond market did not. The 10-year Treasury yield climbed after the Fed left its benchmark rate range unchanged, pushing past a key psychological threshold, marking the largest daily gain for the benchmark yield in a month, while the 30-year yield also rose and the two-year ended slightly lower.

A hawkish hold lit the fuse, with the Fed holding rates in a 10-2 vote, but the two dissenters, Governor Lisa Cook and Cleveland Fed President Beth Hammack, wanted to raise them.

Oil and Data Added Pressure

Energy prices piled on, with crude settling back above $100 a barrel after Yemen's Houthis claimed a missile attack on a Saudi refinery, a claim Riyadh has not confirmed. Economic data also pointed to an economy running hot, with growth tracking models pointing to the strongest quarterly pace in a year.

For the long end of the curve, that combination of strong growth and sticky inflation is a recipe for higher yields, since investors typically demand more compensation to hold long-dated bonds when they expect inflation to persist.

A Steeper Curve

Because the two-year yield, which tracks near-term Fed expectations, slipped while long-dated yields climbed, the yield curve steepened, with the two-year spiking immediately after the decision before giving back the move.

Higher long-term yields weighed on rate-sensitive stocks, with utilities, real estate and consumer staples among the weakest S&P 500 sectors, while the broader market held up as the S&P 500 posted a third straight gain.