Interest rates steady after US inflation data, reaffirmation of low rates in US, overseas

Interest rates barely move in bond market

CHARLOTTE, N.C. — Interest rates barely moved in the bond market Wednesday after the U.S. and Japanese central banks reaffirmed plans to keep interest rates low.

A government report on inflation at the wholesale level also provided additional assurance that the Federal Reserve will not have to raise its key lending rate anytime soon. The Fed said Tuesday it would hold its key interest rate at historic lows for an “extended period.”

Investors expected the Fed to hold rates steady. That, along with the tame inflation report, provided little new incentive to buy up or sell off bonds.

The yield on the 10-year Treasury note maturing in February 2020 fell to 3.64 percent in late trading Wednesday from 3.66 percent late Tuesday. Its price rose 3/32 to 99 27/32. The yield of the 10-year note is linked to interest rates on mortgages and other consumer loans.

Overseas markets rose as Japan’s central bank kept a key interest rate at 0.1 percent and expanded money available through its short-term lending program.

In the U.S., the Labor Department’s said the Producer Price Index fell 0.6 percent in February, its steepest drop in seven months. Economists polled by Thomson Reuters forecast a drop of 0.2 percent.

Thursday’s Consumer Price Index report could shed more light on the pace of an economic rebound.

Inflation could become a problem if the central bank holds its interest rate target at essentially zero for too long. As the economy improves, the Fed will need to start increasing rates to fend off inflation, which could hurt Treasurys.

Stocks held on to modest gains with the Dow Jones industrial average rising more than 47 points. Broader indexes also advanced.

In other trading, the yield on 30-year bond that matures in February 2040 fell to 4.57 percent from 4.59 percent. Its price rose 11/32 to 100 28/32.

The yield on the two-year note that matures in February 2012 was unchanged at 0.92 percent. Its price was 99 29/32.

The yield on the three-month T-bill that matures June 17 fell to 0.14 percent from 0.15 percent. Its discount rate was 0.15 percent.