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Treasury Prices Rise After News of Labor Costs

MARKETSCOPE : Treasury prices continued rallying on Tuesday, after news about labor costs and productivity growth.

The 10-year note climbed 21/32 to 100-03/32 for a yield of 4.49%, while the 30-year bond soared 39/32 to 110-04/32 for a yield of 4.67%.

News hit that the revised third quarter unit labor costs index was revised to up 1.8% from the 2.8% reported last month. Further, Productivity growth in the nonfarm business sector was revised upward to 4.7% in the third quarter, in line with the revision to third quarter Gross Domestic Product announced last week.

The 30-year bond yield is down to 4.715%, while the 2-year yield is down to 4.429%.

S&P's David Wyss says the revision implies a 1.0% drop in unit labor costs, showing no inflation in the economy.

Others disagree.

"Rather than focus on the slowdown in nonfarm unit labor costs, we would draw attention to the year-over-year inflation rate on the nonfarm implicit price deflator within this report rising to a 14-year high in the third quarter," says Bear Stearns John Ryding.

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