U.S. Treasury yields pull back ahead of key Fed meeting

U.S. Treasury yields pulled back slightly on Wednesday morning ahead of the Federal Reserve‘s key monetary policy announcement.

The yield on the benchmark 10-year Treasury note slid to 3.39%, having notched an 11-year high of 3.48% on Tuesday, while the yield on the 30-year Treasury bond dropped to 3.397%. Yields move inversely to prices.

The Federal Open Market Committee will conclude its two-day meeting on Wednesday, and is expected to take aggressive action on interest rates in a bid to rein in inflation. The U.S. consumer price index rose by an annual 8.6% in May, its highest year-on-year increase since 1981.

Traders initially anticipated a 50-basis-point interest rate hike, but in light of the red hot inflation print, the market is now pricing a more than 95% chance of a 75-basis-point increase, the biggest since 1994, according to the CME Group’s FedWatch tool.

The Federal Open Market Committee in May raised the target range for the federal funds rate to 0.75% to 1%, from 0.25% to 0.5%.

Over in Europe, the European Central Bank will hold an unscheduled monetary policy meeting on Wednesday, with bond yields surging for many governments across the euro zone.