Reply #18: U.S. Treasuries Fall After Fed's Moskow Says Rates Need to Rise [View All]

[54anickel]

http://www.bloomberg.com/apps/news?pid=10000103&sid=aqkbfVpoAPb0&refer=us

Aug. 25 (Bloomberg) -- U.S. Treasuries maturing in 10 years or more declined after Federal Reserve Bank of Chicago President Michael Moskow said the central bank needs to keep increasing interest rates to fight inflation.

Moskow said late yesterday in a Rosemont, Illinois speech that not raising rates would risk ``significantly higher inflation.'' The pace of gains in core consumer prices, excluding food and energy, are at the upper end of the Fed's range, he said. Ten-year and 30-year bonds are among the most sensitive to inflation, which erodes the fixed payments on bonds.

``Moskow's comments were pretty hawkish on inflation so there's no stopping the Fed's rate increases for now,'' said Michael Markovic, a fixed-income strategist at Credit Suisse Group in Zurich. ``The market will soon realize that yields are going to have to go much higher.''

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``Moskow was more hawkish than the markets were looking for on the inflation outlook,'' sending notes down, said Prashant Newnaha, a bond strategist at Australia & New Zealand Banking Group Ltd. in Sydney ``We would not be buying them right now.''

Moskow votes on interest rates at the Fed this year.

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