Interest rates fall after Fed meeting

Treasury prices rose after the Federal Reserve on Tuesday described only slight improvements in the economy.

CHARLOTTE, N.C. — Treasury prices rose after the Federal Reserve on Tuesday described only slight improvements in the economy.

The Fed said businesses were spending more, but at the same time the housing and labor markets remain weak.

Policymakers, as expected, left short-term interest rates unchanged.

The yield on the 10-year Treasury note maturing in February 2020 fell to 3.66 percent in Tuesday trading from 3.70 percent late Monday. Its price is up 11/32 at 99 23/32. The yield of the 10-year note is linked to interest rates on mortgages and other consumer loans.

With the Fed’s latest decision, questions still remain about 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. “This statement seems to suggest that’s still a few months away,” said Nick Kalivas, vice president of financial research at MF Global in Chicago.

Investors showed little reaction earlier in the day after Standard & Poor’s took Greece off credit watch. The move was a positive response by the credit rating agency to the country’s fiscal health, and S&P said it is not thinking about downgrading the country’s credit rating for now.

In other trading, the yield on 30-year bond that matures in February 2040 fell to 4.60 percent from 4.63 percent. Its price rose 17/32 to 100 13/32.

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The yield on the two-year note that matures in February 2012 fell to 0.92 percent from 0.95 percent. Its price rose 2/32 to 99 29/32.

The yield on the three-month T-bill that matures June 17 rose to 0.16 percent from 0.15 percent.