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2020.03.0319:23:00UTC+00Treasuries Rebound After Fed Cuts Rates, 10-Year Yield Dips Below 1%

After initially moving to the downside, treasuries showed a significant turnaround over the course of the trading session on Tuesday.

Bond prices climbed well off their early lows and firmly into positive territory but gave back some ground going into the close. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, slid 7.8 basis points to 1.010 percent.

During the session, the ten-year yield dipped below 1 percent for the first time ever, hitting a record intraday low of 0.908 percent.

The substantial rebound by treasuries came after the Federal Reserve announced a surprise decision to cut interest rates by 50 basis points to 1 to 1-1/4 percent.

The Fed was widely expected to wait until its next monetary policy meeting later this month to announce the rate cut.

In the accompanying statement, the Fed said the fundamentals of the U.S. economy remain strong but noted the coronavirus poses evolving risks to economic activity.

The central bank added that it is closely monitoring developments and their implications for the economic outlook and will use its tools and act as appropriate to support the economy.

However, Fed Chairman Jerome Powell indicated during a subsequent press conference that additional stimulus would come in the form of further rate cuts rather than tools like quantitative easing.

The surprise move by the Fed came shortly after finance chiefs from the world's largest economies released a statement pledging to use "all appropriate policy tools" to address the economic fallout from the deadly coronavirus outbreak.

Powell and Treasury Secretary Steven Mnuchin led a conference call with the G7 Finance Ministers and Central Bank Governors to discuss the coronavirus.

In the statement released following the call, the G7 finance chiefs reaffirmed their commitment to use "all appropriate policy tools to achieve strong, sustainable growth and safeguard against downside risks."

The emergency rate cut, the first since the financial crisis, also came after President Donald Trump ramped up pressure on the Fed to lower rates.

"Our Federal Reserve has us paying higher rates than many others, when we should be paying less," Trump said in a post on Twitter. "Tough on our exporters and puts the USA at a competitive disadvantage."

"Must be the other way around. Should ease and cut rate big," he added. "Jerome Powell led Federal Reserve has called it wrong from day one. Sad!"

Trump called for even more "easing and cutting" after the Fed cut rates, urging the central to "come into line with other countries/competitors."

Reports on private sector employment and service sector activity may attract some attention on Wednesday, although news on the coronavirus front is likely to remain in the spotlight.

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