Investors bet Fed will hold interest rates low

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NEW YORK (AP) — Interest rates mostly slipped in the bond market Monday as expectations grew that the Federal Reserve won’t lift borrowing costs anytime soon.

Dennis Lockhart, president of the Federal Reserve Bank of Atlanta, said in a speech that interest rates are likely to remain low until a recovery in the economy shows it has enough momentum, according to a copy of his remarks.

Lockhart also said he expects inflation will remain tame for the “immediate future.” Rising prices are a concern for bond investors because they chip away at returns of fixed-income investments.

The yield on the benchmark 10-year Treasury note, which is tied to interest rates on mortgages and other consumer loans, slipped to 3.82 percent from 3.84 percent late Friday, while its price rose 3/32 to 96 11/32.

Meanwhile, longer-term Treasury prices fell after a Treasury Department auction of $10 billion in 10-year Treasury inflation protected securities drew solid demand. Prices often fall as new supply is added to the market.

The yield on the 30-year bond edged up to 4.73 percent from 4.72 percent as its price fell 9/32 to 94 10/32.

Dan Alpert, managing partner at Westwood Capital in New York, doesn’t expect much action from the longer-duration end of the Treasury market.

“I believe that as long as you see auctions continue to go well there is no reason to believe that the market will do anything but trade sideways,” Alpert said.

The modest moves followed a government report Friday that employers cut 85,000 jobs in December. The job cuts were far deeper than forecast and even with a revised gain in jobs for November, investors remain concerned about the prospects of an economic recovery.

In other trading, the yield on the two-year Treasury fell to 0.95 percent from 0.99 percent. Its price rose 2/32 to 100 3/32.

The yield on the three-month T-bill slipped to 0.03 percent from 0.04 percent. Its discount rate stood at 0.04 percent.