TREASURIES-Yields choppy after data but remain low after Powell speech

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 TREASURIES-Yields choppy after data but remain low after Powell speech
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(Adds U.S. market opening, changes dateline) NEW YORK, Dec 1 (Reuters) - Moderating inflation in October helped U.S. Treasury yields decline further on Thursday, a day after Federal Reserve Chairman Jerome Powell said the U.S. central bank could slow the pace of interest rate hikes at its policy meeting in two weeks. The personal consumption expenditures (PCE) price index rose 0.3%, the same as in September, and over the 12 months through October the index increased 6.0% after advancing 6.3% the prior month. Excluding the volatile food and energy components, the PCE price index rose 0.2%, one-tenth less than expected, after gaining 0.5% in September. Yields backed off a bit from earlier declines, but that was likely due to the unwinding of positions at the month's end and the huge move in bond prices after Powell spoke, said Kim Rupert, managing director of global fixed income at Action Economics in San Francisco. "We're going to go nowhere today and to just hang on to the most of the rally that we got yesterday," said Rupert, adding that Powell was dovish. The two-year Treasury yield, which typically moves in step with interest rate expectations, fell 5.2 basis points to 4.320%, while the yield on 10-year notes slid 8.8 basis points to 3.613%. The benchmark is trading at near two-month lowths. The yield curve measuring the gap between yields on two- and 10-year Treasury notes remained inverted and was at -70.9 basis points. The inversion, when yields on short-dated debt are higher than longer-dated debt, indicates a looming recession. "The yield curve is way too inverted," said Nancy Davis, portfolio manager of the Quadratic interest rate volatility and the IVOL inflation hedge exchange-traded fund. "The market believes the Fed is going to continue to hike but they believe the Fed is going to create a recession, which is consensus at this point," she said. The yield on the 30-year Treasury bond was down 8.3 basis points to 3.740%. The break-even rate on five-year U.S. Treasury Inflation-Protected Securities (TIPS) was last at 2.545. The 10-year TIPS breakeven rate was last at 2.406%, indicating the market sees inflation averaging about 2.4% a year for the next decade. The U.S. dollar five years forward inflation-linked swap , seen by some as a better gauge of inflation expectations due to possible distortions caused by the Fed's quantitative easing, was last at 2.560%. Dec. 1 Thursday 9:23 a.m. New York / 1523 GMT Price Current Net Yield % Change (bps) Three-month bills 4.235 4.3398 -0.024 Six-month bills 4.5275 4.6973 -0.014 Two-year note 100-87/256 4.3202 -0.052 Three-year note 101-56/256 4.0572 -0.077 Five-year note 100-142/256 3.7521 -0.076 Seven-year note 101-30/256 3.6923 -0.081 10-year note 104-64/256 3.6126 -0.088 20-year bond 100-236/256 3.9328 -0.077 30-year bond 104-168/256 3.7401 -0.083 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap spread 31.50 0.00 U.S. 3-year dollar swap spread 12.25 0.25 U.S. 5-year dollar swap spread 3.00 -0.50 U.S. 10-year dollar swap spread -4.25 0.00 U.S. 30-year dollar swap spread -43.25 1.25 (Reporting by Herbert Lash; Editing by Arun Koyyur)


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