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Curve Flattens As Yields Continue To Rise

Bond yields continued the upward move that began last week, as the midterm elections, a quiet FOMC meeting, and the week's economic data pushed equity prices higher and bond prices lower.  The largest moves came in the short end of the curve, flattening the yield curve once again, returning the spread between two- and ten-year Treasuries back to 27 bps.  The notion of a split legislature (between Democrats and Republicans) is generally seen as a positive for financial markets, as it diminishes the chances for one party to push through significant changes. 

The FOMC meeting went as expected with no policy changes announced.  Another 25 bps rate hike is still widely expected at the final meeting of the year in December.  Labor market indicators continued to be robust, while Friday's Producer Price Index release indicated that there are increasing price pressures at the wholesale level.  Prices rose at the highest level since 2012 as solid demand and tariffs impacted producers.

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