Longer-dated Treasury yields rose in July, while 1- to 5-year maturities remained relatively unchanged. Inflation protected securities outperformed, as long-term inflation expectations rose. The FOMC raised the federal funds rate by 25 basis points (bps) as anticipated, moving the target range to 5.25-5.50%. The accompanying communications presented few changes in language and Chair Powell was careful to emphasize future policy changes will remain dependent on labor and inflation data.

Overseas, the Bank of Japan surprised the market by loosening its policy on yield curve control, allowing the 10-year JGB to float up to 1%. Global yields climbed in response to the announcement, as the move threatens demand of other sovereign bonds.

U.S. economic data released in July continued to reflect a resilient economy, with GDP coming in above expectations and durable goods orders remaining strong. Inflation and pricing indicators fell, while labor data began to show some signs of softening.

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