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Mar 22, 2018

CNBC I10-year Treasury yield drops the most in 6 months as investors rush into bonds for safety

10-year Treasury yield falls lower after topping 2.9% on the Fed’s rate hike

Alexandra Gibbs

The yield on the benchmark 10-year Treasury note dropped the most in six months on Thursday as investors fled equities for the safety of bonds in the wake of a sell-off in technology stocks. The Federal Reserve's updated outlook on Wednesday calling for just three hikes in their short-term benchmark rate this year, also caused investors to bet on lower rates in the bond market.
The 10-year yield fell 7.8 basis points to 2.82 percent, its biggest one-day decline since September 2017. The yield briefly jumped above 2.9 percent on Wednesday immediately following the Federal Reserve's rate decision. Bond yields move inversely to prices.

Source: Factset
Dow Jones industrial average futures fell more than 300 points before the open.
On Wednesday, the U.S. Fed raised interest rates by 25 basis points as expected, and upgraded its economic outlook, saying that the economy and job gains had been strong in recent months.
But the Fed kept its rate outlook of three hikes for 2018 the same and traders seem to be focusing on that as reason to bet the central bank will use caution before hiking further.
Following the announcement, the first under new chairman Jerome Powell, Treasury yields rose with the benchmark 10-year yield briefly topping 2.9 percent, before paring some gains.
But the yields gave up those gains and then some on Thursday.
This action looks like "risk-off types moves," said Craig Bishop, vice president of U.S. fixed income at RBC Wealth Management. "I think that other thing that came out of the Fed yesterday was the statement from Powell himself indicating that he isn't concerned that the economy is on the cusp of rapid inflation."
Switching to Thursday, the Bank of England holds its latest monetary policy meeting. The British institution isn't expected to hike rates or make any alterations to its asset purchase program at this meeting.
On the economic front, jobless claims are due out at 8:30 a.m. ET, followed by FHFA House Price Index at 9 a.m. ET. At 9:45 a.m. ET, a flash U.S. Composite purchasing managers' index (PMI) is scheduled to be released, followed by the Kansas City Fed manufacturing survey, set to come out at 11 a.m. ET.
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Looking to the auctions space, the U.S. Treasury is due to auction $11 billion in nine-year and 10 -month Treasury inflation protected securities (TIPS). The size of three bills auctions, three notes auctions and one floating rate notes (FRNs) auction will also be announced.
Overseas, stocks in Europe were under slight pressure, while Asia saw a mixed session Thursday.
—CNBC's Jeff Cox contributed to this report