Treasuries gained as the Federal Reserve left interest rates unchanged and signaled a gradual path to tightening monetary policy.
Yields fell after officials kept the range for the federal funds rate at 0.25 percent to 0.5 percent following a two-day meeting in Washington. Futures traders had ruled out a hike at this week's gathering, while all 77 economists and strategists surveyed by Bloomberg News forecast no change in the policy rate.
While the median forecast of 17 policy makers remained at two quarter-point hikes this year, the number of officials who see just one increase rose to six from one in the previous forecasting round in March, according to projections, known as the dot plot, released by the Federal Open Market Committee.
"The Fed just moving the dots lower makes people feel it's an acknowledgment that they've had to adjust their outlook based on what the data are doing," Charles Diebel, the London-based head of rates at Aviva Investors, which oversees about $351 billion, said before the statement was released.
Yields on two-year notes, the coupon maturity most sensitive to Fed policy, tumbled five basis points, or 0.05 percentage point, to 0.67 percent as of 2:03 p.m. New York time, according to Bloomberg Bond Trader data.
Treasuries have returned 4.5 percent this year as investors sought havens from global volatility and an alternative to more than $8 trillion in negative-yielding sovereign debt worldwide.
The buying accelerated, pushing 10-year yields toward the lowest since 2012, after a June 3 Labor Department report showed the slowest pace of jobs growth in almost six years, causing traders to slash bets on the pace of Fed tightening after liftoff from near zero in December. The Fed is trying to raise rates even as central banks abroad maintain or boost stimulus to bolster economic growth.
