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Yields fall as Fed meeting minutes affirm slower rate hikes

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NEW YORK — U.S. Treasury yields fell

on Wednesday after the Federal Reserve’s November meeting

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minutes showed a “substantial majority” of policymakers agreed

it would “likely soon be appropriate” to slow the pace of

interest rate hikes.

The readout of the Nov. 1-2 meeting, at which the Fed raised

its policy rate by three-quarters of a percentage point for the

fourth straight time, showed officials were largely satisfied

they could stop front-loading the rate increases and move in

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smaller, more deliberate steps.

The minutes also showed an emerging debate within the Fed

over the risks the rapid policy tightening could pose to

economic growth and financial stability, even as policymakers

acknowledged little demonstrable progress had been made on

inflation and that rates still needed to rise.

“It’s the same message that was in the policy statement,

it’s the same message that was in Powell’s press conference and

the same message that has been in the speeches since then, which

is that they are going to raise rates at least a little bit more

… and rates are going to end up higher than they thought,”

said Thomas Simons, a money market economist at Jefferies in New

York.

Yields fell despite the minutes showing no major surprises.

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Some of the move was likely due to thin trading conditions a

day before the U.S. Thanksgiving holiday, said Simons. Some

investors might also be buying bonds to get an early start on

month-end rebalancing.

Benchmark 10-year note yields fell five basis

points on the day to 3.711%. Two-year yields dipped

three basis points to 4.490%.

The closely watched two-year, 10-year part of the yield

curve was last at minus 78 basis points, after

reaching minus 86 basis points.

The Fed this year has embarked on the swiftest tightening of

U.S. monetary policy in 40 years as it attempts to bring down

decades-high inflation. How high rates end up, however, will

remain dependent on data.

Yields had dipped early on Wednesday after data showed

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jobless claims increased more than expected last week.

“The fact that the jobs numbers came in worse than expected,

leads us to believe that the Fed is accomplishing its goals,”

said Thomas Hayes, chairman and managing member of New

York-based Great Hill Capital.

More releases in the coming weeks could point to an economic

slowdown, reflecting the lagging effects of the Fed’s monetary

tightening measures, he added.

Other data on Wednesday showed resilience in business

spending on equipment, and a contraction in the manufacturing

and services sectors. New home sales also rose in October.

November 23 Wednesday 2:50 p.m. New York / 1950 GMT

Price Current Net

Yield % Change

(bps)

Three-month bills 4.21 4.3139 0.003

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Six-month bills 4.5325 4.7026 0.003

Two-year note 100-5/256 4.4897 -0.027

Three-year note 100-184/256 4.2396 -0.034

Five-year note 99-226/256 3.901 -0.038

Seven-year note 100-80/256 3.8237 -0.048

10-year note 103-108/256 3.7112 -0.047

20-year bond 100-80/256 3.9771 -0.080

30-year bond 104-168/256 3.7403 -0.088

DOLLAR SWAP SPREADS

Last (bps) Net

Change

(bps)

U.S. 2-year dollar swap 31.25 1.75

spread

U.S. 3-year dollar swap 13.25 1.50

spread

U.S. 5-year dollar swap 6.50 0.50

spread

U.S. 10-year dollar swap -3.25 0.50

spread

U.S. 30-year dollar swap -44.50 1.25

spread

(Additional reporting by Davide Barbuscia in New York; Editing

by Richard Chang)

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