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· U.S. government debt yields fell Wednesday after the Federal Reserve struck a more dovish tone in its June policy statement and Chair Jerome Powell said that the case for easier monetary policy had strengthened.

At around 4:37 p.m. ET, the yield on the benchmark 10-year Treasury note, which moves inversely to price, was lower at around2.027%, while the yield on the 2-year slipped to 1.751%, its lowest level since 2017. The 3-month Treasury bill yield ticked lower to2.177%, keeping a portion of the yield curve inverted.

· The yield on the benchmark 10-year Treasury note fell below 2% for the first time since November 2016 on Wednesday — breaching a key psychological level — after the Federal Reserve struck a more dovish tone in its June policy statement and Chair Jerome Powell said that the case for easier monetary policy had strengthened.

At around 8:28 p.m. ET, the yield on the benchmark 10-year Treasury note, which moves inversely to price, declined below 2% to around 1.992% — its lowest level since November 2016. The yield on the 2-year slipped to 1.7168%, its lowest level since 2017. The3-month Treasury bill yield ticked lower to 2.175%, as of 7:30 p.m. ET.

· A divided Federal Reserve held the line on interest rates Wednesday and indicated formally that no cuts are coming in 2019. The decision came amid divisions over what is ahead and still leaves open the possibility that policy loosening could happen before the end of the year depending on how conditions unfold.

The central bank predicts one or two rate cuts in its set of economic predictions, but not until 2020. Despite cautious wording in the post-meeting statement Wednesday, markets are still betting the Fed cuts, as soon as July.

And Powell opened the door to that possibility in a press conference following the statement, saying, “Many participants now see the case for somewhat more accommodative policy has strengthened.”

In a decision closely watched by financial market participants clamoring for multiple cuts, central bank officials on the Federal Open Market Committee voted 9-1 to keep the benchmark rate in a target range of 2.25% to 2.5%, where it has been since December’s controversial quarter-point increase. St. Louis Fed President James Bullard voted to reduce the rate.

· The action sets up a possible confrontation between Fed Chairman Jerome Powell and President Donald Trump, who has been pressuring the Fed to cut rates. Just Tuesday, Trump said “let’s see what he does” at the Fed meeting when asked if he still wants to demote Powell.

At the post-statement news conference, Powell was asked about his future as chairman. “I think the law is clear that I have a four year term, and I fully intend to serve it,” he said.

The strong majority for this month’s decision contrasted with a sharp difference of opinion on what happens next.

The committee provided an important nod to those worried about slower growth: It dropped the word “patient” in describing its approach to policy. The characterization was a key part of the Fed “pivot” earlier this year that signaled to the market a more dovish approach.

· “The Fed didn’t surprise investors with the decision to maintain rates, but the split vote tells us that a cut is on the way and it’s increasingly likely that will be in July, as bond markets have been hoping,” said Neil Birrell, chief investment officer at Premier Asset Management.

The statement also changed wording to concede that inflation is “running below” the Fed’s 2% objective. In their forecast for headline inflation this year, officials slashed the estimate to 1.5% from March’s 1.8%. Core inflation, which excludes volatile food and energy prices, is likely now to be 1.8% from March’s 2%, according to the quarterly summary of economic projections also released Wednesday.

· “I think they’re fully planning on cutting in July, absent stronger data,” said Ed Keon, QMA chief investment strategist. “The market liked it now, but it’s important to keep in mind, rate cuts are not a magic wand. There is clear evidence of weakening of economic conditions.”

· Aiming to jumpstart dormant talks, the top U.S. trade negotiator said on Wednesday he will confer with his Chinese counterpart before next week’s meeting between President Donald Trump and Chinese President Xi Jinping in Japan as the two countries take another shot at resolving their damaging trade dispute.

U.S. Trade Representative Robert Lighthizer told a congressional hearing he will speak by telephone with Liu He, China’s vice premier and chief negotiator in the trade talks, “in the next day and a half” and then expects to meet with Liu in Osaka, site of the June 28-19G20 summit, along with U.S. Treasury Secretary Steven Mnuchin before Trump’s meeting there with Xi.

· Upcoming trade talks between the leaders of China and the United States are unlikely to immediately resolve major disagreements between the two sides but could start a new phase in negotiations, Chinese state media said on Thursday.

· The Bank of Japan is widely expected to keep its ultra-loose monetary policy unchanged on Thursday but signal its readiness to ramp up stimulus if global risks threaten the country’s economic expansion, nodding to the widening fallout from the U.S.-China trade war.

· Oil prices were little changed on Wednesday after the Federal Reserve said that the central bank will keep interest rates steady.

Brent crude futures were down 29 cents, or 0.47 percent, to $61.85 a barrel.

U.S. West Texas Intermediate crude settled down 14 cents, or 0.3 percent, to $53.76 a barrel. On Tuesday, it had recorded its biggest daily rise since early January.

Reference: CNBC, Reuters