US treasury yields fall to 16-month low

US treasury yields have fallen to a 16-month low after the Fed last night outlined plans to resume its stimulus programme.

The benchmark 10-year treasury yield reached 2.74% yesterday, the lowest since April 2009, following the announcement the central bank will reinvest maturing bond proceeds into "longer-term" government securities.

It has fallen even further today, with the yield down another three basis points, to 2.72%. The yield on the two-year treasury has fallen 1 basis point to just 0.50%.

"The move was clearly needed, considering the poor data coming out of the US in recent months," Axa Sterling Strategic Bond fund manager Nick Hayes says.

"But it is interesting they have not increased the stimulus, just reinvested to keep it at the same level. It is the one step before having to go back into full-blown QE.

"Clearly it has moved the belly of the curve, because they said they are targeting the 2-10 year end. However, it is more symbolic, it has been done to demonstrate they are willing to act."