U.S. inflation forecast drops on Thursday as bond traders weigh on

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U.S. inflation forecast drops on Thursday as bond traders weigh on

Treasury yields continued to decline on Thursday, ahead of data on U.S. inflation at the wholesale level in September.

The yield on the 10-year-note TMUBMUSD 10 Y, fell to 1.53%, down from 1.549% at 3 p.m. Eastern on Wednesday

The 2 year Treasury yield TMUBMUSD 02 Y was at 0.354%, though not less than 0.368% Wednesday evening.

The 30-year Treasury Bond TMUBMUSD 30 Y yielded 2.043%, slightly higher than 2.041% on Wednesday.

The yield curve - a line that plots yields across Treasury maturities — flattored on Wednesday, even though the headline September consumer price index came in slightly above expectations, although minutes of the September Federal Reserve meeting affirmed policy makers are leaning toward beginning to taper monthly asset purchases before the end of the year.

Some analysts said the falling in longer-dated yields despite the somewhat hotter than expected inflation data partly reflected fears that the Fed may ultimately be forced to raise interest rates even more than forecast, risking a policy error that could undercut future economic growth. Others said it could reflect fears of a scenario in which lower growth makes it difficult to begin an extended cycle of rate increases after the Fed completes the tapering process. Read: Stronger than expected U.S. inflation data has bond traders weighing the risk of a Fed policy error Meanwhile, Fed minutes indicated the tapering process could begin mid-November or mid-December, in line with signals from Fed officials and market expectations. The international producers-price index for September is due to go into production at 8: 30 a.m. Eastern. Economists surveyed by The Wall Street Journal are expecting a 0.6% monthly rise after a 0.7% increase in August. The quarterly data on jobless benefit claims is set to be published at 8: 30 a.m. What are analyst's saying? Market participants have underestimated the PPI data so far this year, and we don't think it is going to be any different today, said Steve Barrow, leader of G 10 strategy at Standard Bank, in a note. Angst on the Treasury market is difficult to say as sensitivity to the PPI data seems pretty low.