The US Federal Reserve's decision to leave interest rates unchanged has triggered a sharp shift in the Treasury market, with investors questioning the central bank's commitment to tackling inflation. The move has led to an unusual steepening of the US Treasury yield curve, as shorter-dated yields declined while long-term yields climbed sharply.
The market reaction came despite Fed Chair Kevin Warsh signalling that policymakers remain prepared to tighten monetary policy further if inflation does not ease. Investors, however, appeared unconvinced that another rate hike is imminent, leading to a widening gap between short- and long-term Treasury yields.
