Treasury Yields, Dollar Surge as Fed Raises Odds of December Rate Hike

Treasury Yields, Dollar Surge as Fed Raises Odds of December Rate Hike

Weak inflation data in the U.S. has prompted investors to dial back their bets on future rate hikes, but the market may be underestimating the Federal Reserve, according to Nick Gartside, worldwide chief investment officer of fixed income at JP Morgan Asset Management.

The Fed's interest rate policy can have an impact on mortgage rates and cap rates, and by extension property prices.

With the pound slipping to 1.3486 against the greenback, Britain's FTSE 100 is expected to open around 10 points higher at the start of trading, according to financial bookmakers IG.

Brent crude futures rose $1.15, or 2.1 percent, to settle at $56.29 a barrel, while US crude futures gained 93 cents, or 1.9 percent, to settle at $50.41.

USA share prices recovered quickly from initial losses following the Fed's announcement, with the S&P 500 ending slightly higher, adding to a string of closing records. The Nasdaq slipped 5 points to 6,456.

The bank also signalled the possibility of another interest rate hike before the end of the year, though it kept rates unchanged for now. Comparable store sales fell 2.6 percent. ConocoPhillips and Halliburton both rose more than one percent.

The 10-year yield on Monday touched a almost three-year high at 2.119 per cent.

The broader S&P 500 Index extended losses after the Fed statement was released before recouping losses to close higher. The Dow Jones industrials were little changed.

The portfolio now is dominated by some $4.2 trillion of U.S. Treasury and mortgage-backed securities acquired in a bid to restrain long-term interest rates and support the economy's recovery from the 2007-2009 global financial crisis.

Over the longer run, officials now see the rate target at 2.8%, rather than 3%, with the current rate rise campaign largely complete by 2020.

Oil prices were higher. Technology stocks were down the most.

Retailer Bed Bath & Beyond plummeted 15.9 percent after reporting that second-quarter earnings tumbled 43.7 percent from the year-ago period to $94.2 million.

Other major currencies, including the euro and the pound benefitted from the greenback's shortcomings as they rose 0.2 percent to 1.2012 and 0.4 percent to 1.3556 per dollar respectively.

In a welcome sign for anyone looking for a job, the Fed also expects American companies to keep hiring and unemployment to fall further to 4.1 percent next year.

After showing a lack of direction for much of the day, treasuries came under pressure following the Federal Reserve's monetary policy announcement on Wednesday. ConocoPhillips gained 1.3 percent.