Rates Up as Commodity Prices Soar
Fraust, Bart, American Banker
Interest rates rose on Tuesday as a surge in commodity prices pounded government securities.
The increase was particularly sharp on the short end, amid rumors that Federal Reserve policymakers had voted to tighten credit to stop the price rises.
The bond-equivalent yield on one-year Treasury bills rose to 3.40% from 3.31% last Friday.
The yield on the two-year note rose to 4.01% from 3.91%. The yield on the 30-year Treasury bond went up to 6.68% from 6.67% and that on the 10-year note rose to 5.79% from 5.74%.
The bond market initially opened on a strong note, propelled by Japanese buying on last Friday's worse-than-expected employment report for June.
But there was little follow-through demand for Treasuries in the United States.
"The bond market lost some support because of the sharp rise in commodity prices," said William Sullivan, money market economist for Dean Witter Reynolds Inc.
Driven by weather-related increases in soybean and other grain prices, the Commodity Research Bureau's index shot up 5.29 points, or 2.5%, to 217.30. The index measures 21 commodity futures prices.
But bad weather in the Midwest was not the only reason for the rise in the index. …