Fed Not Setting Rates in Credit Markets: Sources

Steve Liesman, senior economics reporter, CNBC

The recent surge in interest and mortgage rates is not down to the Federal Reserve’s purchases of Treasury and mortgage assets, sources familiar with the thinking of Fed officials told CNBC.

The $1.2 trillion in mortgage assets and $200 billion in Treasurys bought by the Fed in an attempt to backstop the troubled credit market were not designed to impact rates, the sources said.

Yields on 10-year U.S. government bonds jumped more than 50 basis points in the last two weeks, which unnerved many investors.

Fed officials are studying reasons for the rise in rates and are suggesting that the increases are partly due to economic improvement, convexity hedging, declining deflation concerns as well as overall demand, according to the sources.