Long-term rates fall as inflation fears ebb

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December 22 (Reuters) – Long-term US Treasury yields were lower on Wednesday, flattening the yield curve as traders appeared to dismiss the threat of long-term inflation.

The benchmark 10-year yield fell 3 basis points to 1.4566% in morning trading, restoring some of the increase it posted on Tuesday.

Eric Jussaume, director of fixed income for Cambridge Trust, said the moves suggested investor worries about inflation were waning despite stronger-than-expected economic data released on Wednesday morning.

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“I think the market sees this as yes, we have higher short term inflation, but we could go back to the trendline at some point,” he said.

The bond purchase pushed down a closely watched part of the US Treasury yield curve measuring the spread between the yields on two and ten year Treasuries, seen as an indicator of economic expectations. It was 78 basis points, more than a basis point lower than Tuesday’s close.

Concerns over the spread of the Omicron variant of the coronavirus have contributed to the risky purchase of safer U.S. notes and bonds. The main Wall Street indices opened lower. Read more

The US Department of Commerce on Wednesday revised its measure of economic growth for the third quarter upwards on Wednesday and said activity has since recovered, putting the economy on track to post its best performance this year since 1984. . read more

On December 15, the U.S. Federal Reserve announced it would end its pandemic bond purchases in March and pave the way for interest rate hikes of three-quarters of a percentage point by the end of 2022. read more

Traders will watch the results of a noon auction worth $ 17 billion of 5-year inflation-protected Treasury securities. Demand was strong at a Tuesday auction of 20-year bonds. Read more

The two-year US Treasury yield, which typically moves with interest rate expectations, fell less than a basis point to 0.6728%.

December 22 Wednesday 9:22 a.m. New York / 1422 GMT

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Reporting by Ross Kerber in Boston; Editing by Alison Williams

Our standards: Thomson Reuters Trust Principles.


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