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Treasury Yield Curve Steepens

Latest round of Fed stimulus stirs inflation speculation.

By Daniel Kruger and Susanne Walker, Bloomberg | Updated on September 14, 2012

The yield gap between 10- and 30-year Treasuries widened to the most in a year on concern the Federal Reserve’s plan to buy more debt and pledge to keep monetary policy accommodative even when the economy strengthens will spur inflation.

The difference touched 1.21 percentage points, the most since August 2011, as yields on 30-year debt, more sensitive to inflation because of its longer maturity, climbed to the highest since May. The drop in prices followed a $13 billion sale of bonds just before the Federal Open Market Committee said it would expand its holdings of long-term securities with mortgage- debt purchases. It also said it would probably keep interest rates at virtually zero into 2015.

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