NEW YORK: US 30-year Treasury yields dipped on Friday on views the outlook for inflation looked weak, while short-dated yields edged up as US industrial production data supported a potential December Federal Reserve rate hike.
Analysts said traders re-evaluated after 30-year Treasury yields moved higher on Thursday, when data showed a measure of US consumer prices that strips out food and energy costs rose more than expected in September.
While the data suggested stronger inflation, traders reconsidered that view in light of readings earlier this week showing weaker-than-expected US producer prices and a cooling of consumer inflation in China last month.
Traders repurchased 30-year Treasury bonds, which tend to attract buyers on views of lower long-term inflation because low inflation preserves the value of interest payouts.
"The preponderance of the data hasn't been supportive of inflation," said Anthony Valeri, fixed income strategist at LPL Financial in San Diego.
US 30-year Treasury bonds were last up 7/32 in price to yield 2.86 percent from a yield of 2.87 percent late Thursday.
Yields move inversely
to prices.
Data showing US industrial production for August upwardly revised to negative 0.1 percent from negative 0.4 percent was viewed as positive and supported views of a December Fed rate hike.
Short-dated Treasury yields, which are most vulnerable to Fed rate hikes, edged higher.
Rates futures on Friday, however, suggested traders anticipate a Fed rate increase - which would be the since 2006 - will occur at the Federal Open Market Committee meeting in March 2016, at the earliest.
The industrial production data was "very much on the margin," supporting expectations of a December Fed hike, said Guy LeBas, chief fixed income strategist at Janney Montgomery Scott LLC in Philadelphia.
US three-year Treasury notes were down 1/32 in price to yield 0.90 percent from a yield of 0.89 percent late Thursday.
Benchmark 10-year Treasury notes were up 1/32 in price to yield 2.02 percent, roughly unchanged from their yield level late Thursday.
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