10-year Treasury yield falls after briefly rising above key 4% mark Wednesday

U.S. Treasury yields rose Wednesday as investors bet that perhaps the Federal Reserve wouldn't cut rates as aggressively as hoped for this year.

The 10-year Treasury yield was last down by nearly two basis point to 3.926, after touching above 4% earlier in the morning. The 2-year Treasury yield was last trading at 4.345% after rising nearly 2 basis points. Yields and prices have an inverted relationship and one basis point equals 0.01%.

The 10-year Treasury yield was in a steep downtrend to end 2023 since spooking investors by rising above 5% in October. The 10-year yield closed out last year at around 3.83%. The downturn helped fuel a year-end rally in stocks.

But that has reversed this year with investors questioning whether the market is getting too optimistic about how aggressively the Fed may cut rates this year. The Fed changed its hawkish tune mid-December, forecasting three rate cuts in 2024. Traders began betting the Fed would be even more aggressive than that and also move to lower rates pretty soon into the new year.

Richmond Federal Reserve President Thomas Barkin on Wednesday noted that interest rate hikes were still "on the table" even though the Fed is making "real progress" on inflation.

Minutes from that Fed December meeting will be released Wednesday at 2 p.m. ET. Those minutes could shed light on what the central bank expects for interest rates, including what economic picture policymakers are looking for before deciding to cut rates, and when they think rate cuts could happen.

The minutes may also provide additional insights into the Fed's expectations for the overall economy, including inflation and whether a recession can be avoided in the U.S. after the central bank's rate-hiking cycle.

Yields declined from their session high after November's JOLTS report came about in line with expectations at 8.79 million employment listings. December's ISM Manufacturing report, also released on Wednesday, registered a 47.4 reading. This was higher than both consensus estimates and the previous month's level, indicating expanding demand.

According to CME Group's FedWatch tool, markets are currently pricing in an over 66% chance of the first rate cut taking place in March.

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