U.S. yields move higher after inflation data

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NEW YORK — The benchmark U.S. 10-year

Treasury yield rose on Friday following two straight days of

declines after economic data indicated high inflation could

persist for some time.

The producer price index for final demand rose 0.7% last

month, the Labor Department said, a tick above the 0.6%

estimate. In the 12 months through August, the index has

accelerated 8.3%, the largest year-over-year advance since

November 2010.

Investors have been highly attuned to labor market and

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inflationary data for signs of when the U.S. Federal Reserve may

announce plans to begin tapering its massive bond-buying

program.

But rising COVID-19 cases from the Delta variant threaten to

stall the economic recovery, which could alter the Fed’s policy

path. On Thursday, President Joe Biden announced policies that

require most federal employees to get COVID-19 vaccinations and

push large employers to have their workers inoculated or tested

weekly.

“The fact we are locking down and causing some economic

destruction again is having a positive effect on bond yields,”

said Tom di Galoma, managing director at Seaport Global Holdings

in New York.

“Everybody that is in the economic world sees inflation …

it is definitely there but the market is discounting it because

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of the variant, that is really the bigger picture.”

The yield on 10-year Treasury notes was up 2.3

basis points to 1.323%. For the week, the yield was roughly

unchanged.

Multiple Fed officials have this week said a slowdown in job

growth wouldn’t necessarily throw the central bank’s plan to cut

asset purchases this year off track, even after last week’s

payrolls report fell well short of expectations.

On Friday, Cleveland Federal Reserve Bank President Loretta

Mester said inflation could remain high this year but come back

down next year, with upside risks to the outlook.

On Thursday, the European Central Bank said it would over

the coming quarter slow its emergency bond purchases implemented

during the COVID-19 pandemic.

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The yield on the 30-year Treasury bond was up

1.6 basis points to 1.915%.

A closely watched part of the U.S. Treasury yield curve

measuring the gap between yields on two- and 10-year Treasury

notes, seen as an indicator of economic

expectations, was at 110.4 basis points.

The two-year U.S. Treasury yield, which typically

moves in step with interest rate expectations, was up 0.1 basis

point at 0.217%.

September 10 Friday 10:09 AM New York / 1409 GMT

Price Current Net

Yield % Change

(bps)

Three-month bills 0.045 0.0456 0.000

Six-month bills 0.05 0.0507 0.000

Two-year note 99-210/256 0.2167 0.001

Three-year note 99-206/256 0.4406 0.003

Five-year note 99-192/256 0.8015 0.015

Seven-year note 100-40/256 1.1016 0.021

10-year note 99-84/256 1.3225 0.023

20-year bond 98-120/256 1.8421 0.019

30-year bond 101-236/256 1.9153 0.016

DOLLAR SWAP SPREADS

Last (bps) Net

Change

(bps)

U.S. 2-year dollar swap 9.75 0.50

spread

U.S. 3-year dollar swap 11.00 0.50

spread

U.S. 5-year dollar swap 9.25 0.25

spread

U.S. 10-year dollar swap 2.75 0.25

spread

U.S. 30-year dollar swap -25.25 0.25

spread

(Reporting by Chuck Mikolajczak)

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In-depth reporting on the innovation economy from The Logic, brought to you in partnership with the Financial Post.

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