S&P MARKETSCOPE: The benchmark 10-year Treasury notes, which were higher most of the day after a modest PPI report, were down 16/32 to 95-09/32. The yield, which had fallen to 4.47% earlier, surged to 4.61%, its highest since July, 2004.
Dealers say the fact the Fed brought up the inflation subject and pricing power disturbed some traders who think Fed might become more aggressive. Some see the market creating a potential inflation premium in the next 10 years. PIMCO's Bill Gross sees the 10-year yield in a range of 4.35% to 4.70%.