Bonds: US Treasury yields move lower after Fed decision

These were the movements in the most widely-followed 10-year sovereign bond yields:

US: 1.57% (-4bp)

UK: 1.12% (-2bp)

Germany: 0.01% (-1bp)

France: 0.40% (-2bp)

Spain: 1.56% (-0bp)

Italy: 1.50% (-1bp)

Japan: -0.18% (-2bp)

Greece: 8.18% (-3bp)

Portugal: 3.35% (-4bp)

The possibility of Brexit was a factor in the US central bank's decision on Wednesday to stay put on interest rates, Fed chair Janet Yellen said during her post-meeting press conference.

As indeed it should have been, one might think, given that the uncertainty surrounding the referendum had helped to push yields on the debt of the most highly-rated government issuers to record lows over recent sessions.

Nevertheless, the most significant aspect of the Fed's policy deliberations was that the majority of the Fed's top officials had lowered their projection for the level of the Fed funds rate at the end of 2018 to just 2.4% from the 3.0% seen as recently as March.

That was as per the economic and interest rate forecasts submitted by the members of the Fed's Board and its regional bank chiefs ahead of their two-day meeting.

Their economic forecasts were little changed but those estimates for interest rates appeared to point to a notable shift in how US rate-setters expected the economy to perform over the short-term.

"In other words, the Fed has become even more ‘gradual’ in its hiking plans beyond this year. All’n all it seems that the Employment Report for May has dealt a serious blow to the Fed’s confidence in the ability of the US economy to maintain momentum in face of global headwinds. Hence a shallower rate path is needed," Rabobank's Philip Marey said in a research note sent to clients.

"Despite leaving its economic projections largely unchanged today the FOMC nevertheless cut its interest rate projections quite sharply, suggesting it has adjusted its so-called reaction function again," chipped in Paul Ashworth, chief US economist at Capital Economics.

To take note of, the yield on the policy-sensitive two-year bond yield declined by five basis points to 0.67%. The odds assigned by Fed funds futures to a 25 basis point rate hike by the FOMC by the time of its 14 December meeting stood at 47.4% according to CME data.

Lastly, employment data from ONS appeared to show that labour market conditions were holding up well despite the slowdown in economic activity.

"The labour market is proving pretty resilient given the strong headwinds facing it – muted UK growth so far in 2016, heightened domestic and global economic uncertainties magnified by the EU membership referendum and the National Living Wage coming into operation in April. Nevertheless, job creation has slowed compared to the start of the year and much of 2015," said Dr. Howard Archer, chief UK+European economist at IHS Global Insight.

The rate of unemployment in the UK for the three months to the end of April unexpectedly dropped by one tenth of a percentage point to 5.0%.

That came alongside quicker regular wage gains of 2.3% year-on-year over the latest three-month stretch.

"Should next Thursday’s referendum see a vote for the UK to leave the EU, we suspect that markedly weaker UK economic activity and weakened business confidence amid heightened uncertainty and concerns will take an appreciable toll on the labour market and see unemployment move significantly higher," Dr.Archer added.