Treasurys Rally After Fed Decision
NEW YORK--The Treasurys market rallied Tuesday after the Federal Reserve reined in rate-increase speculation by reiterating its firm pledge to keep interest rates low to help the economy recover.</br></br>Prices of short-dated Treasurys rose and yields fell after the Federal Open Market Committee kept its key policy rate, the federal-funds target rate, in a range of zero to 0.25% for "an extended period." Short-dated maturities, especially the two-year sector, are the most sensitive to changes in official rate outlook.</br></br>Short-dated Treasurys suffered a bout of selling in the run-up to the Fed's meeting as many investors bet policy makers would tweak their commitment to keeping rates "exceptionally" low for an "extended period" to reflect the improvements in the economy. Changes to this language are seen as paving the way for an eventual tightening in monetary policy.</br></br>But with the Fed repeating its low-rate stance, these investors were forced to buy short-dated Treasurys to cover their bets on further bond-price declines.</br></br>"There is a bit of a relief rally," said Ted Ake, head of Treasury and agency trading in New York at Societe Generale SA. "This release is telling the market that it will be at least six to nine months before they are ready to tighten."