US Treasury Yields take a breather after recent rally, Fed’s policy in focus

US Treasury Yields have paused their recent surge following a multi-year high, as the Federal Reserve prepares to announce its monetary policy later in the day. In Wednesday's Asian trading session, 10-year US Treasury Yields fell by 0.5% to around 4.98%, after reaching a peak of 4.04% the previous day. Anthropic CEO and co-founder Dario Amodei cautioned against excessive global investment in Artificial Intelligence (AI) infrastructure, warning of real dangers and the industry's past downplaying of AI risks.

This warning contributed to a significant decline in semiconductor and AI chipmakers stocks. The issuance of substantial amounts of US bonds by major AI investors, totaling about $250 billion in 2026 and $400 billion in 2027, is believed to be a key factor behind the increased Treasury Yields. Analysts from Goldman Sachs predict that five major hyperscalers will issue $250 billion of bonds in 2026 and another $400 billion in 2027, more than double the $108 billion invested in 2025.

Despite the Fed's expected rate hike to 3.75%-4.00%, strategists at BNY maintain that the path to even higher policy rates faces potential obstacles. The Federal Reserve deliberates on monetary policy at eight meetings per year, with the primary goal of maintaining inflation at 2% and full employment. The Fed's main tool for achieving this is setting interest rates, which can strengthen or weaken the US Dollar depending on whether rates are raised or cut.

USD/JPY rose to a fresh one-week high above 155.00 in the Asian session, driven by oil-driven inflation fears and the anticipated Fed rate hike. Gold is attempting to surpass $4,300 early Wednesday, but its movement depends on the Fed's monetary policy decision and outlook.