Producer Prices Fall Most on Record

[girl gone mad]

The larger-than-forecast 2.8 percent drop in producer prices was the biggest since records began in 1947 and followed a 0.4 percent decline in September, the Labor Department said today in Washington. The median projection in a Bloomberg News survey was for a 1.9 percent fall.

Bonds initially pared gains after so-called core producer prices that exclude fuel and food rose a greater-than- anticipated 0.4 percent for a second month, indicating declines have yet to make it down assembly lines.

Consumer Price Report

Consumer prices likely dropped 0.8 percent, the most since 1949, according to another Bloomberg survey. The report is scheduled to be released tomorrow.

Traders' expectations for inflation over the next decade waned as growth slowed and the price of crude sank more than 60 percent from a record in July, yields show. The difference between rates on 10-year Treasury Inflation Protected Securities, or TIPS, and conventional notes was 55 basis points, the lowest since at least August 1998, compared with 89 basis points on Nov. 12.

Oil touched a 22-month low.

The so-called yield curve between two- and 10-year notes narrowed for a third day, to 2.39 percentage points. The spread was 2.62 percentage points on Nov. 13, the most in more than five years.

http://www.bloomberg.com/apps/news?pid=20602007&sid=arEekrUIaYo0&refer=govt_bonds