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7/19, 2:44 PM (Source: TeleTrader)
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Treasuries drop on Fed's mixed signals on rates

Investors pushed lower the prices of sovereign debt securities issued by the United States, causing a strong rebound in short-term yields on Friday before the opening bell on Wall Street. Markets reversed much of yesterday's plunge in the equivalent of two-year interest rate almost to a 20-month low following a claim by the Federal Reserve Bank of New York that remarks by its President John Williams represented only the result of academic research and not policy stance. Both he and Governor Richard Clarida have expressed the view that a preemptive rate cut at the sign of trouble eases economic pain.

Traders' bets on a 50-basis-point reduction in the benchmark range for the Fed's upcoming meeting have sharply increased before easing somewhat. The dollar rallied today, taking back yesterday's losses. The recovery was underpinned by earlier remarks by St. Louis Fed chief James Bullard published today.

The two-year US yield surged 6.2 basis points to 1.814% at 8:43 am ET. The ten-year rate jumped three points to 2.054%. The yield on 30-year bonds was up only 1.2 points at 2.577%. Equivalent futures fell 0.08%, 0.21% and 0.14%, respectively.

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