10-year Treasury yield rises on strong GDP report ahead of Fed decision

Treasury yields climbed on Wednesday after data showed the U.S. economy grew at a much better than expected pace in the second quarter. Investors also awaited a key Federal Reserve decision.

The 10-year Treasury yield rose about 3 basis points at 4.35%. The 2-year yield was up by 2 basis points to 3.90%, and the 30-year note yield gained 3 basis points to 4.89%.

Gross domestic product, a sum of goods and services activity across the sprawling U.S. economy, jumped 3% for the April-through-June period. That exceeded the Dow Jones estimate for 2.3% and helped reverse a decline of 0.5% for the first quarter.

The Fed will make its interest rate announcement on Wednesday afternoon, and it's widely expected to keep interest rates unchanged. Traders are pricing in a nearly 98% likelihood that the central bank will keep its key rate in a range of between 4.25% and 4.5%, according to CME Group's FedWatch tool.

“In terms of near-term policy, our economists think Powell is unlikely to remove a September rate cut from consideration nor intentionally raise the probability of that outcome,” Deutsche Bank analysts said in a note.

“Even though political pressure on Powell to cut rates remains high, our view is that due to modestly stronger inflation prints over the coming months, the first cut should be in December, after which we expect a further 50bps reduction in Q1 2026,” the analyst said.

Fed Chair Jerome Powell will also give a speech at the press conference after the decision, which investors will monitor for hints about future monetary policy decisions, especially as President Donald Trump has tried to pressure the central bank leader to lower rates in recent months.