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Yields Higher as 10-Year Note Briefly Surpasses 3%

 Yields ended an eventful week only slightly changed, as bond prices recovered from their mid-week lows.  The ten-year Treasury note temporarily exceeded 3% for the first time since January, 2014 as inflation concerns pushed yields higher.  In addition to the economy's potential impact on rates, traders are preparing to deal with a surge in new debt issuance by the U.S. government.  The Treasury is expected to increase the sizes of upcoming auctions to address their funding gap as the CBO updated its projection that the growing budget deficit will pass $1 Trillion for the first time in fiscal year 2020. 

The week's economic indicators were largely positive, with weekly initial jobless claims declining to the lowest level in nearly 40 years.  The labor market's strength was reflected in first quarter labor costs, as the Employment Cost Index (a component of GDP) rose by 0.8%, versus the prior quarter's 0.6% advance.

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