Treasury yields at almost 9-month highs as Fed retains stimulus

Inflation Concern

The economy is forecast to have created 161,000 jobs in January, according to economists in a Bloomberg News survey, when the Labor Department announces this month’s nonfarm payroll data Feb. 1. Monthly job growth has averaged 153,000 since the start of 2011.

Government bonds briefly pared losses after gross domestic product, the volume of all goods and services produced, dropped at a 0.1% annual rate, the Commerce Department said, weaker than any economist forecast in a Bloomberg survey. A drop in government outlays and smaller gain in stockpiles cut a combined 2.6 percentage points from growth.

“Fourth-quarter gross domestic product was a reminder of how weak the underpinnings of the U.S. economy are,” Jeffrey Caughron, an associate partner at Baker Group LP in Oklahoma City, said in a telephone interview. The firm advises community banks on investments exceeding $42 billion. “The economy will continue to turn in subpar performance, which will compel the Fed to continue aggressive monetary easing.”

The Fed’s measure of traders inflation expectations for the period from 2018 to 2023, known as the five-year five-year forward break-even rate, has climbed since the Fed announced it would buy $40 billion a month of mortgage-backed securities Sept. 13. It touched 2.88% today, the highest since Nov. 1, after averaging 2.52% in the six months before the mortgage purchases were announced.

Bloomberg News

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