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Strong Data and Resurgent Stocks Push Yields Higher

Treasury yields recovered this week after nearly a month of sustained declines.  Rates rose by one to four bps across the curve, with longer-date maturities adding the most.  The move echoed an early-week resurgence in US equity markets.  The advances also came amid a slate of economic releases which seem to support the Fed's expected 25 bps hike at next week's FOMC meeting. 

Inflation, as measured by the core Consumer Price Index, rose 2.2% in November.  This is consistent with the Fed's desired level, although they tend to focus on the quarterly PCE measure.  Thursday's retail sales report was also strong, as consumers appear confident heading into the holiday season. 

The recent decline in gasoline prices boosted Novermber spending and is likely to support further discretionary spending.  The importance of consumer spending is reflected in the fact that the gas price decline has led to higher 4Q GDP estimates from some economists.

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