Treasury 10-year note yields fell the most since September after a government report showed the US added the fewest jobs in December in two years, bolstering speculation an uneven economic recovery may slow the pace of Fed cuts to its bond-purchase programme. The difference between the yields on two- and 10-year notes, the yield curve, narrowed to the least in six weeks as signs the labour market may not be as strong as thought spurred traders to unwind bearish bets that had pushed yields on benchmark Treasuries to the highest levels since July 2011 . The Fed, which meets on January 28-29 , cut monthly debt purchases to $75 billion starting in January, from $85 billion , citing labour-market improvement. A report this week is forecast to show retail sales slowed last month. "We have floating anxiety about where the Fed is going to be," said Tom Tucci , managing director and head of Treasury trading in New York at CIBC World Markets Corp. Economic reports before the jobs data had "been much stronger. The market is trying to find a balance and find a true gauge on where the Fed is going to be and where the goal posts are," he said. The benchmark 10-year yield decreased 14 basis points on the week, or 0.14 percentage point, to 2.86 per cent on Friday in New York , the most since the week ended on September 20 , Bloomberg Bond Trader data showed. The 2.75 per cent note due in November 2023 added 1 5/32, or $11.56 per $1,000 face amount, to 99 2/32. The yield climbed to 3.05 per cent on January 2 , the highest since July 2011 . The difference between yields on two- and 10-year debt narrowed to 249 basis points, the least since Nov. 29 . Treasuries traded at the most expensive level in more than three weeks, based on the term premium, a model that includes expectations for interest rates, growth and inflation.
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