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Bond yields rose on Thursday, heading in the reverse direction after the 10-year yield had declined to its lowest level in nearly five months.

What’s happening

  • The yield on the 2-year Treasury
    was 4.37%, up 3.7 basis points. Yields move in the opposite direction to prices.

  • The yield on the 10-year Treasury
    was 3.88%, up 2.9 basis points. The yield on Wednesday was the lowest since July 26.

  • The yield on the 30-year Treasury
    was 4.01%, up 2.2 basis points.

What’s driving markets

The bond rally from Wednesday came after data showing surprisingly low U.K. inflation, although U.S. economic data surprised to the upside.

The demand for bonds came even with a disappointing auction of 20-year notes, ahead of the auction of $20 billion of reopened 5-year Treasury inflation-protected securities scheduled for Thursday.

“With real yields sharply lower over the last two months, breakevens well off their local tights reached two weeks ago, the 5-year sector appearing somewhat rich, and the technical backdrop challenging, we think the supply will require a modest concession to be digested smoothly,” said JPMorgan strategists led by Jay Barry.

Ahead of Friday’s release of personal consumption expenditure price index data, Thursday sees weekly jobless benefit claims, the third estimate of third-quarter GDP, the Philadelphia Fed manufacturing index and the leading economic index, a series that has been predicting a recession that hasn’t come.

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