Rise in Rates Jolts Markets

By LIZ RAPPAPORT

Treasury yields and mortgage rates surged Wednesday to their highest levels since November, dealing a blow to the Federal Reserve’s efforts to stimulate the economy by keeping borrowing costs low.

The Fed has made low mortgage rates a priority in its strategy to stem the U.S. recession. To achieve that, the central bank has been buying mortgage-backed securities and Treasurys. Through programs announced since last fall, it has bought more than $460 billion of mortgage-backed securities and more than $125 billion of Treasury bonds.

But the winds turned against the Fed in recent days, as investors worry the government’s approach could lead to inflation.
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