Treasury Yields Hover Near the Lowest of the Year Ahead of the Fed Decision

Yields on U.S. government bonds were approaching their lowest levels of the year early Wednesday as market participants awaited the Federal Reserve’s first policy announcement of 2025.

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Current Treasury Yield Movements

The 2-year Treasury yield slipped by 1 basis point, settling at 4.194%, down from Tuesday’s 4.204%. Treasury yields and prices move in opposite directions, meaning the slight decline reflected increased demand for government debt.

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Meanwhile, the benchmark 10-year Treasury yield dropped by 3 basis points to 4.518%, compared to 4.548% in the prior session. The 30-year Treasury yield also declined, falling 2.9 basis points to 4.760% from 4.789% the day before.

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Both the 10-year and 30-year yields were on track to fall below their Monday closing levels, which were the lowest since December. The 2-year yield, closely tied to interest rate expectations, was hovering near its lowest closing level of 2025 so far.

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Investor attention was squarely on the Federal Reserve’s upcoming policy announcement, scheduled for 2 p.m. Eastern Time. Analysts widely anticipate that officials will keep the federal funds rate target unchanged within the 4.25%–4.5% range.

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Following the policy decision, Federal Reserve Chair Jerome Powell’s press conference at 2:30 p.m. will provide additional insights. Market participants will be closely monitoring Powell’s remarks, particularly regarding how the central bank is factoring in the potential for inflationary pressures stemming from proposed tariffs under a possible Trump administration return.

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Traders in the fed-funds futures market currently anticipate a range of scenarios, with CME FedWatch Tool data indicating a 32.9% probability of two quarter-point rate cuts by the end of 2025.

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Despite expectations for rate cuts later in the year, some analysts caution that the Federal Reserve may hesitate to ease policy too soon, especially given the economy’s continued resilience.

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“The Fed is unlikely to cut rates in the near term as the economy remains strong,” said Mark Malek, chief investment officer at Siebert Financial. “There’s concern that lowering rates too quickly could reignite inflation.”

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Malek noted that while the futures market suggests the first rate cut could come between May and June, with a second cut likely before year-end, these projections are subject to change.

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“There are many variables at play,” he explained in an email. “Potential tariffs could drive inflation higher, while shifts in labor market policies—including those related to immigration—might further disrupt the workforce and contribute to price pressures. The key question is whether the Fed will need to keep rates elevated for an extended period or even consider rate hikes instead of cuts.”

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As investors await further guidance from the central bank, bond yields will likely remain sensitive to shifts in economic data, inflation trends, and Federal Reserve communications in the coming months.

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