TREASURIES-Yields slip as market awaits Powell, 10-year edges back from 4-month high

(Updates as of 0951 ET)

By Alden Bentley

NEW YORK, Nov 14 (Reuters) - U.S. Treasury yields briefly ticked up on Thursday after data showed a solid labor market and a bit more pipeline inflation, before falling back again as the market awaited an afternoon speech by Jerome Powell for any clues about the Fed's next move.

The market was mostly subdued during the day, with yields falling in early trade after the benchmark 10-year Treasury rose to a four-plus month high overnight on worries about the budget and inflation ramifications of incoming President Donald Trump's proposed policies on tariffs, immigration and tax cuts.

The benchmark 10-year yield was off 2.7 basis points from late Wednesday at 4.424% by 1451 GMT, after reaching 4.483% overnight, its highest since early July.

It briefly rose on Thursday after the Labor Department said its producer price index for final demand rose 0.2% last month after an upwardly revised 0.1% gain in September. Economists polled by Reuters had forecast the PPI climbed 0.2% following a previously reported unchanged reading in September.

In the 12 months through October, the PPI increased 2.4% after advancing 1.9% in September, all further evidence that progress toward lower inflation was stalling.

Traders were awaiting Powell's speech for any signs that policy makers may have modified their assessment of the economy since lowering interest rates by 25 basis points last month, their second easing since September's aggressive 50 bp cut. He is due to give an update on his economic outlook to business leaders in Dallas at 3 p.m. EST/2000 GMT followed by questions and answers.

Thursday's data also showed the number of Americans filing new applications for unemployment benefits fell 4,000 last week to a seasonally adjusted 217,000, suggesting the labor market continued to chug along and that the abrupt slowdown in job growth in October that had raised hopes for continued Fed rate reductions was an aberration.

Guy LeBas, chief fixed income strategist at Janney Montgomery Scott in Philadelphia, said that while PPI doesn't actually measure producer costs, it is an important input into estimates of the personal consumption expenditures price index, which is the inflation measure the Fed's pays the most attention to.

"It looks like the core PCE is probably going to hit three-tenths of a percent this month," LeBas said. "So that will be two months a little bit on the warm side. So, it's enough to raise a couple of eyebrows among the FOMC."

After the data traders priced in about a 75% chance of a quarter-point interest-rate cut in December, versus more than 80% beforehand. They also lightened up on their expectations for rate cuts in 2025, pricing in no more than two further quarter-point hikes.

Federal Reserve governor Adriana Kugler said Thursday the central bank has made considerable progress toward achieving its job and inflation goals, but stopped short of offering firm guidance for the near-term monetary policy outlook.

Richmond Fed President Thomas Barkin later said the Fed needs to keep building on its great progress and that the current level of unemployment is fine. Whether it is normalizing or weakening is still to be determined, he said.

Bond prices have been falling for months as a strong U.S. labor market and then the election of Trump as President and Republicans into majorities in Congress have driven expectations of deficits and a stickier inflationary outlook.

On Wednesday data showed U.S. consumer prices rose in October. That was expected but still unsettling for markets that had priced in 75 basis points in interest rate cuts between now and the end of 2025.

"Normally to me that expected CPI print would lock in a 25 point cut in December, but things have changed dramatically with Trump's election and the 'red sweep,'" said ATFX Global market analyst Nick Twidale.

The 2-year note yield, which typically moves in step with interest rate expectations, was 1.7 bp lower at 4.265%.

A closely watched part of the U.S. Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes, seen as an indicator of economic expectations, was at a positive 15.7 bp vs 16.3 bp on Wednesday.

The 30-year bond yield fell 4.2 basis points to 4.5936%.

"Inflation isn't going anywhere fast," said ING economist Rob Carnell. "4.5% is not a stupid number for the 10-year and potentially 5% should be considered a possibility." (Additional reporting by Tom Westbrook in Singapore; Editing by Shri Navaratnam and Susan Fenton)