Fed minutes may signal interest rate rise next year

Nov 22 | Updated: Nov 23 2005, 07:23am hrs
US Treasuries fell before Tuesdays release of minutes of the Federal Reserves most recent meeting on interest rates, which may contain signs that policy makers will keep raising rates next year.

Confidence that Fed rate increases will keep inflation in check has narrowed the margin by which the benchmark 10-year Treasury notes yield exceeds the central banks 4% target rate almost to its smallest in four years. With a small gap, investors in 10-year notes need yields to hold steady or decline in order to get higher returns than they could on cash. As long as the Fed continues to raise rates and inflation continues to be a risk, there will be further chance for yields to rise, said Nick Stamenkovic, a fixed-income strategist at RIA Capital Markets Ltd in Edinburgh. Everyones attention will be on the tone of the minutes on today.

The 10-year notes yield rose 1 basis point, or 0.01 percentage point, to 4.47% in New York, according to broker Cantor Fitzgerald LP. Yields move inversely to prices. The yield may rise to 4.5% this week, Mr Stamenkovic said. The price fell 3/32, or 94 cents per $1,000 face amount, to 100 5/16.