The yield on the 10-year Treasury note - which moves in the opposition direction of price - declined to 2.69 percent from about 2.73 percent before the Fed announcement at 2 p.m.
Citing rising uncertainty about the USA economic outlook, Fed Chairman Jerome Powell said the case for raising rates had "weakened" and, in a statement, the U.S. central bank dropped its earlier expectation for "some further" tightening.
Like Dalal Street, the dovish tone may also be taken kindly by US President Donald Trump, who was at loggerheads with Fed Chair Jerome Powell, demanding that the central bank should stop raising rates.
The S&P 500 index rose 17 points, or 0.6 percent, to 2,657. The policymakers also said they're prepared to slow the reduction of their bond holdings if needed to help the economy.
Powell, speaking to reporters after the end of the Fed's latest two-day policy meeting, said the central bank would likely stop trimming its $4.1 trillion balance sheet sooner, leaving it with more assets than previously expected.
The FOMC dropped previous language calling for "some further gradual increases" in interest rates and opened the door for the next move to be either up or down, as it cited "global economic and financial developments and muted inflation pressures".
Of course, the Fed didn't specifically say that its campaign to bring interest rates back to more normal levels was over.
"The market is very aggressively discounting any positive outcomes this year" in areas such as domestic growth, trade and the global economy, said Ed Al-Hussainy, a senior interest-rate strategist at Columbia Threadneedle.
"At such times, common sense risk management suggests patiently awaiting greater clarity", he said. The committee made a decision to keep interest rates unchanged as expected, however regarding the rate hike plans for 2019 - they changed their stance from delayed rate hikes to patient wait and see approach. He didn't comment on the Fed's actions on Wednesday, but he did tweet "Dow just broke 25,000".
For January it is up more than 7.2 percent which is its best January since the index began in 1988 and the best performance in any month since December 2015.
After an additional one-quarter-percentage-point increase in December, to 2.25%-2.50%, Powell agreed Wednesday the Fed was close to neutral, meaning the key rate was neither boosting nor retarding the economy.
It may not be long before that record is broken.