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Interest rates rise on concerns about inflation

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NEW YORK (AP) — Interest rates mostly rose in the bond markets Wednesday as minutes from the Federal Reserve’s December meeting showed that policymakers disagreed over the risks of inflation.

Concerns about rising prices, which erode the value of returns on fixed-income investments, dented Treasury prices and pushed their yields higher.

The yield on the 10-year Treasury note, which is linked to interest rates on consumer loans like mortgages, rose to 3.83 percent in late trading from 3.76 percent late Tuesday. Its price fell 16/32 to 96 8/32.

Minutes from the Fed’s last meeting illustrated that policymakers disagreed over whether to bolster or scale back a program to help prop up the housing market. The Fed has been buying mortgage debt to keep mortgage rates low and entice home buyers.

The risk of leaving supports for the economy in place too long is that it could lead to inflation, which policymakers say remains in check for now. On the other hand taking the economy off life-support too quickly could endanger a recovery.

Still, analysts said there were few signs that the Fed plans to raise interest rates until much later this year, if not next year.

Meanwhile, a handful of economic reports gave mixed signals. The Institute for Supply Management, a trade group of purchasing executives, said its services index rose to 50.1 in December from 48.7 in November. A reading above 50 signals growth. The latest figure fell short of expectations but still bolstered hopes that the economy is strengthening.

The report on services companies eased some concerns about a report that employers cut 84,000 private sector jobs in December. The ADP National Employment Report was weaker than analysts had predicted, according to Thomson Reuters.

Questions about inflation made investors reluctant to jump into Treasurys. The yield on the 30-year bond rose to 4.69 percent from 4.61 percent and its price fell 1 8/32 to 94 29/32.

The yield on the two-year Treasury fell to 1.01 percent from 1.03 percent as its price edged up 1/32 to 99 31/32.

The yield on the three-month T-bill fell to 0.04 percent from 0.05 percent. Its discount rate was 0.05 percent.