| Old conundrum, new twist
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| Inverted or flat, the yield curve points to a weaker Federal Reserve, not a downturn. (Full story)
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NEW YORK (CNN/Money) -
Treasuries edged down Thursday as traders anticipated Friday's payrolls report, expected to be yet another sign that the economy is growing stronger, and that the Federal Reserve will continue raising interest rates.
The benchmark 10-year note fell 5/32 to 98-15/32, to yield 4.32 percent, up from 4.30 percent late Wednesday. The 30-year bond fell 12/32 to 112-25/32, to yield 4.52 percent, up from the previous session. Treasury prices and yields move in opposite directions.
In shorter-dated debt, the five-year note was down three ticks to 98-25/32, yielding 4.15 percent. The two-year note was down one tick, yielding 4.04 percent. Yields on the two-year note haven't crossed the four percent mark in more than four years.
A strong batch of economic data over the past two weeks has largely cemented expectations for the Federal Reserve to continue raising interest rates by a quarter-percentage point at each policy meeting in the foreseeable future.
As a result, some analysts said it would take an unusually large surprise in either direction for the job figures to have a major impact on bond yields, particularly short-term debt.
"The market's expectations for a more hawkish Fed have steadily increased during the past 30 days," said John Kosar, president of Asbury Research.
"The market still expects three more 25-basis-point hikes in the federal funds target rate to 4 percent by the end of this year, but is now anticipating the third hike to come as early as November," he added.
The Labor Department said initial claims for jobless aid fell last week, partly due to fewer claims from autoworkers and other manufacturers. First-time claims for state unemployment benefits fell to 312,000, below the consensus analyst estimate of 315,000. (Full story.)
Added to last week's news of record home buying and strong durable goods orders, jobless claims paints an increasingly robust view of economic strength
Strong economic data has also led to a sell-off in Treasuries, which was stemmed Wednesday when the Treasury Department said it would resume issuance of the 30-year bond beginning next year. (Full story.)
Traders cheered that announcement, which is expected to add liquidity in long-term debt markets and help the government finance its budget deficit. The 30-year bond was discontinued in 2001 when the government expected to see surpluses and a lessened need for the long maturity.
In currency trading, the dollar gained was mixed. It bought ¥111.34, up from ¥111.06 late Wednesday, while the euro bought $1.2378, up from $1.2333 in the previous session.
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