Money Rates Rising Hint Treasury Losses Amid Fed Exit

[Celebration]

http://www.bloomberg.com/apps/news?pid=20601087&sid=agXHcHY4QAbE&pos=3

Money market interest rates at five-month highs show the Federal Reserve is laying the groundwork to siphon a record $1 trillion in excess cash from the banking system and sending a bearish signal on Treasuries.

Overnight federal funds rates rose to the highest since September and the cost to dealers to borrow and lend U.S. securities for one day more than doubled in the past month. Three-month Treasury bill rates rose last week to the highest since August.

The rise is a sign traders are preparing for tighter monetary policy as stimulus measures end. In the three months before the Fed started raising borrowing costs in June 2004, 10-year Treasury yields rose about 0.75 percentage point as bond prices fell. While higher rates mean increased borrowing costs for President Barack Obama, they also show growing confidence that the economic recovery is gaining traction.

“The Fed is definitely getting its ducks in a row,” said Mark MacQueen, a partner at Austin, Texas-based Sage Advisory Services Ltd., which oversees $7.5 billion. “There is no doubt that in the early phases of the Fed’s plan, the Treasury market could suffer.”

[the other one]

1. K n R

[eridani]

2. OK, then why are banks still dropping the amount of interest they pay on CDs? n/t

[Celebration]

3. this is more like breaking news

As of the last day or two. And the effect so far is subtle.

[eridani]

4. Do you see any benefits for savers in this, then? n/t

[Celebration]

5. Yes, in terms of interest rates

But whether that will benefit savers really depends on the rate of inflation.

But yeah, banks are being saved now on the backs of the savers. Few people point that out.