Treasury Yields Hint Market Losing Faith in Fed on Inflation

Investor's Business Daily (03/11/08) P. A1; Stoddard, Scott
The widening spread between 10-year Treasury notes and the 10-year Treasury Inflation-Protected Securities (TIPS) is a major concern for the Federal Reserve, which has been focused on guarding against inflation. Of late, the central bank has tried to prop up an economy nearing a recession by cutting interest rates. However, some market analysts believe the Fed will have to increase interest rates, and quickly, in response to the growing pressures on prices. Donald Ellenberger, co-head of government and mortgage-backed fixed-income groups at Federated Investors, says Fed officials still want to stimulate growth--which could give TIPS a boost--but other observers see signs of an end to the securities' boom.