BONDS SLIDE ON RATE HIKE FEARS

B O N D S

Canadian bonds ended sharply lower yesterday, weighed down by expectations of further interestrate increases in Canada and the United States.

Canadian bonds took their broad general direction from U.S. treasuries, which sold off on expectations of continued rate increases from the U. S. Federal Reserve.

The declines come amid increasingly bearish sentiment in the marketplace as Fed officials continue to signal more tightening of monetary policy is in store in order to keep inflation at bay.

The Fed has raised rates 11 straight times since June 2004, taking its target federal- funds rate to 3.75% from 1%. Hawkish minutes from the Fed’s last policy meeting on Sept. 20, released Tuesday, continued to cast a shadow over fixedincome markets Wednesday.

“There’s a general sense that the Fed is increasingly worried about the inflation outlook. I think that’s lingering in the back of bond investors’ minds,” said Sal Guatieri, senior economist at BMO Financial Group.