Fed Raised Rates, but Bond Market Had Other Ideas

Investor demand pushed down Treasury yields, highlighting challenge facing U.S. central bank

On the day the Federal Reserve implemented its plan to raise interest rates, driving up overnight borrowing costs, broader market forces conspired instead to drive other U.S. interest rates down.

The Fed increased its overnight target rate for lending between banks early Thursday, hitting 0.35%. But yields on Treasurys—from one-month bills to 10-year notes—fell as demand from investors drove prices higher.