Asian stocks were mixed while Treasuries extended gains after the Federal Reserve struck a dovish tone in its latest policy statement. The dollar weakened against all major peers.
The 10-year Treasury yield dropped below 2% to its lowest since November 2016 and two-year rates continued to fall. Stocks saw modest gains in Tokyo and Hong Kong and were little changed in South Korea and China.
Gold climbed to its highest level since 2013. US futures rose. Earlier, the S&P 500 Index edged higher as the Fed indicated an increased readiness to cut interest rates. Next up comes the monetary policy decision in Japan, where government-bond yields remained under pressure.
Seven of 17 Federal Reserve officials now think it will be appropriate to lower the benchmark overnight rate by a half-percentage point by the end of the year, according to updated projections published Wednesday. The Fed cited “uncertainties” in the outlook that have increased the case for a rate reduction as officials seek to prolong the near-record US economic expansion.
Bond traders are virtually certain that the Fed will ease policy as soon as next month. The rate implied for the July 31 Fed decision dropped by 7 bps to about 2.06%. That suggests about 31 basis points of rate cuts by then. The January 2020 fed funds futures contract implies close to 75 bps of easing by the end of 2019.
Elsewhere, oil recovered to trade above $54 a barrel after a report showing a decline in US crude supplies and record gasoline consumption and OPEC and its allies agreed an early July date to discuss extending production cuts.