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Why didn't demand for Treasury notes and bonds rise much?

Part 2
Why didn't demand for Treasury notes and bonds rise much? (Part 2 of 8)

Why did yields for medium-to-long-term Treasuries fall last week?

Bond prices rebound after the release of the Fed’s March meeting

The bond markets had reacted strongly after the Fed’s meeting on March 18 and 19 to the belief that the Fed would start increasing its Fed funds rate earlier than expected. Yields across maturities rose sharply on March 19, with medium-term securities (two years to seven years) taking the biggest hit.

Treasury yield curveEnlarge GraphThe Fed released the minutes of the meeting held on March 18 and 19 on Wednesday, April 8. The minutes indicated that economic conditions may warrant keeping interest rates low even after achieving the Fed’s goal of an unemployment rate of 6.5% and inflation of 2%, easing investors’ concerns about a sooner-than-expected rate hike. Over the week, short-term yields went up marginally while those on medium- and long-term securities fell noticeably. As yield and price share an inverse relationship, prices of bonds across the medium-to-long-term spectrum rose in reaction to the fall in yield.

Major bond ETFs such as the Vanguard Total Bond Market ETF (BND) and the iShares iBoxx $ Investment Grade Corporate Bond Fund (LQD) have gained over the week. The Vanguard Total Bond Market ETF (BND) invests in investment-grade bonds, including Treasuries and corporate bonds, while the iShares iBoxx $ Investment Grade Corporate Bond Fund (LQD) invests in corporate bonds, including those issued by Verizon Communications (VZ), Goldman Sachs (GS), and Apple (AAPL).

The U.S. Treasury auctions securities with different maturities every week. To learn more about the frequency and process of these important auctions, read on to the next part of this series.

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