Treasury yields top 5% as Fed tightening weighs on stocks and peso

  • The Federal Reserve unanimously raised its target range by 25 basis points to 3.75%-4% while signaling that further tightening remained possible.
  • The 10-year Treasury yield reached 5.04% and later rebounded above 5%, while the S&P 500 and Dow each fell 0.3%.
  • Sixteen of 18 Fed officials projected at least one additional increase, and markets assigned higher odds to a December move than an October hike.

The 10-year U.S. Treasury yield reached 5.04% before easing to 4.95% and later rebounding above 5% as the Federal Reserve raised its federal funds target range by 25 basis points to 3.75%-4% and signaled that further tightening remained under consideration. U.S. stocks weakened, with the S&P 500 and Dow each falling 0.3% and the Nasdaq 100 edging below unchanged, while banks, asset managers and heavily indebted AI infrastructure companies declined. All 12 FOMC voters supported the September 16 decision, 16 of 18 officials projected at least one additional increase before year-end, and market-implied odds favored a December move over an October increase. Goldman Sachs expected an October hike, while Bank of America forecast increases in both October and December. The Mexican peso weakened toward 17.2 per dollar from 16.98 on September 11 as the narrowing interest-rate differential supported the dollar, while Banxico held its benchmark rate at 6.50%. Higher yields raised borrowing costs and the opportunity cost of holding Bitcoin and other non-yielding assets.

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