U.S. government bond prices rose Thursday as investors focused on geopolitical risks and the outlook for inflation and Federal Reserve policy.
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The yield on the benchmark 10-year U.S. Treasury note fell to 2.323%, the lowest since Sept. 28, from 2.346% Wednesday. Yields fall as bond prices rise.
Investors bought Treasurys after the U.S. Geological Survey reported an event with "earthquake-like characteristics" in an area of North Korea where nuclear tests have been conducted. Also spurring demand for bonds was a U.S. proposal to let the North American Free Trade Agreement expire after five years unless the U.S., Canada and Mexico each renew it.
"There was quite a bit of bad news," said Aaron Kohli, an interest-rate strategist with BMO Capital Markets.
Yields moved briefly higher earlier in the session as labor and inflation data raised expectations that Friday's report on consumer prices could show that inflation will be strong enough for the Fed's course of rate increases to match the central bank's forecasts. Central bank officials have suggested they are inclined to raise rates once more this year and three times in 2018.
Initial jobless claims, a proxy for layoffs across the U.S., decreased by 15,000 to a seasonally adjusted 243,000 in the week ended Oct. 7, the Labor Department said Thursday. Economists surveyed by The Wall Street Journal expected 252,000 new claims last week. Claims surged last month, hitting 298,000 after Hurricane Harvey hit Texas and Louisiana. Producer prices also rose 0.4% in September and 2.6% from a year ago, the largest increase since February 2012.
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Signs of tepid inflation have limited selling in Treasurys recently. Inflation can threaten the value of long-term government bonds because it erodes the purchasing power of their fixed payments. Central bank officials have said they expect recent weak inflation readings are caused by transitory factors.
If a strong CPI report "doesn't rescue the Fed's thesis on inflation, the market is primed for a bounce," Mr. Kohli said.
Corrections & Amplifications
This item was corrected at 5:48 p.m. ET. The original incorrectly called the U.S. Geological Survey the U.S. Geological Service.
"U.S. Government Bonds Rise on Geopolitical Risks," at 1627 ET, incorrectly called the U.S. Geological Survey the U.S. Geological Service, in the third paragraph. (Oct. 12)
(END) Dow Jones Newswires
October 12, 2017 18:02 ET (22:02 GMT)