Treasury yields defy Fed's intent

WASHINGTON, Nov. 16 (UPI) -- Yields on U.S. Treasury bonds have defied logic and headed higher despite the Federal Reserve's controversial bond purchasing program.

The program triggered a hailstorm of criticism from Germany, Brazil, Thailand, South Korea, China and elsewhere. Even conservatives in Washington and former Alaska governor Sarah Palin weighed in with criticism.

Palin called the Fed's move a ploy meant to "drive down the value of the enormous national debt (President Barack) Obama has run up," ABC News reported.

The stated intention of the program was to add liquidity to the financial system. By buying bonds, the Fed puts more money into circulation and drives the prices of bonds higher, which adversely affects their yields or interest rates.

The Fed kicked off its buying late last week, The Wall Street Journal said. However, yields have gone higher, not lower, with 10-year notes climbing to 2.95 percent Monday, up 0.4 percent from Nov. 3, when the Fed announced the program.

Analysts said a high release of corporate bonds recently has diverted interest in buying Treasuries. Investors also had two months warning before the Fed made the program official, which meant part of the historically low mortgage rates this month could be attributed to anticipation of the Fed's move.

"The recent run-up in bond yields is worrying to many … (but) you need to keep it in context of what happened before the Fed moved," Dan Greenhaus, chief economic strategist at New York trading firm Miller Tabak, told the Journal.