10- and 30-year Treasury yields fall to lowest in over a week after `decent’ $22 billion bond auction, scant 0.2% rise in wholesale prices

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Yields on 10- and 30-year Treasuries fell to their lowest levels in more than a week on Thursday, after a solid $22 billion auction of 30-year bonds and only 0.2% rise in US wholesale prices in December .

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Ben Jeffrey, strategist at BMO Capital Markets, said the bond sale produced “decent results.” Meanwhile, Federal Reserve Governor Lyle Brainard testified that reducing inflation would be the central bank’s most important task for the foreseeable future, while other data showed US weekly jobless claims hit their highest level since mid-November. went.

What is the produce doing?
What is driving the market?
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Yields fell on Thursday, in a somewhat counterintuitive rally in the Treasury, even as investors braced for a period of higher-than-normal inflation and a Federal Reserve that seeks to tighten monetary policy to counter it.

Markets are in a ‘wonderland’ when it comes to inflation and the Fed – and that US dollar is sinking

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During his US Senate confirmation hearing to take the Federal Reserve’s No. 2 spot, Brainard said, “Inflation is very high, and working people around the country are worried about how far their paychecks will go.

“Our monetary policy is focused on bringing inflation back to 2%, while maintaining a recovery that is all-encompassing,” she said.

Lyle Brainard says inflation is ‘too high’. The Fed will work to bring it down.

Data released Thursday showed US wholesale prices rose a modest 0.2% in December, the smallest increase in 13 months. Growth in the producer price index fell from the 0.4% forecast of economists polled by The Wall Street Journal. Meanwhile, wholesale prices declined to 9.7% in the past one year as against 9.8% in the previous month. This was the first drop in the annual rate since the start of the pandemic.

The PPI’s report came just a day after the December consumer-price index headline showed year-on-year inflation rose to a nearly 40-year high of 7%, indicating that higher prices will remain in place in 2022. likely to live.

In other US figures, initial jobless claims rose by 23,000 to 230,000 for the week ended January 8, the highest since mid-November. Economists polled by the Wall Street Journal estimated the new claims would drop to 200,000. Although jobless claims were higher than expected, they pointed to a tight job market.

what analysts are saying

Greg Basuk, chief executive of AXS Investments, said although the PPI rose lower than expected, “we believe investors have reason to remain hyper-focused on factors likely to keep inflation elevated in the coming months.”

Although consumer-price data “summarized on Wednesday satisfied investors with expectations that inflationary pressures may be more durable, we caution investors that one-month data is not a market cycle, and inflation based on a one-month reading.” Premature conclusions could lead to misalignment on the trajectory of the investor portfolio,” Basuk wrote in an e-mail.

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