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US Yields Fall After Labor Market and Inflation Data

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NEW YORK – U.S. Treasury yields tumbled Thursday after labor data

The market and inflation eased concerns that the Federal Reserve should take action before

expected to fight price spikes, with shorter dated notes poised to break a long run

higher.

Weekly initial claims for state unemployment benefits dropped by 36,000 to a

adjusted 293,000 versus expectations of 316,000. Other data showed the producer price index for

Final demand increased by 0.5% in September after having advanced by 0.7% in August and was just below the

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0.6% estimate.

Short-term returns have risen in the last two days, while longer-term returns have fallen,

that has served to flatten the yield curve, indicating that the market is anticipating a rate hike

by the Fed.

The yield on two-year US Treasuries, which typically moves in line with interest

rate expectations, dropped 1.4 basis points to 0.354% and was set for its first decline after

seven straight days of earnings, its longest streak since June.

The gap between the yields of two-year and ten-year Treasury notes, seen as an indicator

of economic expectations, fell for the third day in a row to 115.6 basis points, its lowest level

level since September 24 and was the last at 116.4.

“With all the supply and demand situation that is happening with the goods that enter the country,

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Economists are starting to feel that maybe GDP won’t be what it’s supposed to be, it will

it will probably be around the 2 to 3 percent level, “said Tom di Galoma, Managing Director of Seaport.

Global Holdings in New York.

“In the short term, we reached levels where the market found buyers.”

The yield on 10-year Treasury notes fell 3 basis points to 1.519%.

St. Louis Fed Chairman James Bullard said current high levels of inflation may not

decline as soon as many Federal Reserve politicians expect, and again urged the central bank to

pursue a faster reduction in your bond buying program.

Federal Reserve Bank of San Francisco president Mary Daly said Thursday that inflation and

Employment has progressed enough that the US central bank begins to reduce its

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buying bonds, but is far from ready for interest rate hikes.

Tom Barkin, chairman of the Richmond Federal Reserve, said he does not expect the Fed

plans to start reducing its asset purchases to hamper economic growth, but it could be a

“Positive” movement in the establishment of inflation expectations.

The 30-year Treasury yield fell 1.7 basis points to 2.024%.

October 14 Thursday 2:48 PM New York / 1848 GMT

Price

BONDS US T DEC1 160-4 / 32 0-15 / 32

10YR TN Notes DEC1 131-124 / 256 0-68 / 256

Net current price

Yield% change

(bps)

Three-month invoices 0.045 0.0456 -0.005

Six-month invoices 0.0575 0.0583 0.000

Two-year note 99-204 / 256 0.3541 -0.014

Three-year note 99-250 / 256 0.6329 -0.029

Five-year grade 99-36 / 256 1.0533 -0.034

Seven-year note 99-92 / 256 1.3467 -0.030

10-year note 97-140 / 256 1.5194 -0.030

30-year bond 99-120 / 256 2.0238 -0.017

DOLLAR EXCHANGE SPREADS

Last (bps) net

Change

(bps)

2-year US dollar swap 13.50 0.50

spread

3-year US dollar swap 14.25 0.75

spread

5-year US dollar swap 7.50 0.25

spread

10-year US dollar swap 1.00 0.00

spread

30-year US dollar swap -24.25 -0.75

spread

(Reporting by Chuck Mikolajczak; Editing by Will Dunham and Diane Craft)

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