U.S. yields move higher after inflation data
By Chuck Mikolajczak NEW YORK, Sept 10 (Reuters) - 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 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 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. 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)
