Treasuries Little Changed as Fed Say Rate Cuts Are Less Likely

Treasuries were little changed as Federal Reserve officials suggested that the central bank won't be as quick to reduce borrowing costs as traders anticipated.

Yields rose earlier from the lowest since 2005 after Fed Governor Randall Kroszner said an economic ``rough patch'' in coming months won't be enough to warrant additional rate cuts. Officials are reluctant to lower borrowing costs further.

Policy makers have lowered borrowing costs by 75 basis points to 4.5 percent since September.

Treasury two-year notes are headed for a fifth weekly gain in the longest rally in eight months. Yields of the notes are down 10 basis points this week on concern the worst housing slump in 16 years will slow economic growth. Securities firms and banks have written down more than $50 billion of securities linked to subprime mortgages.

Yields on 10-year notes were unchanged today at 4.14 percent. They yielded 83 basis points more than two-year notes, the widest spread since March 2005. The steepening of the yield curve suggests increased demand for shorter-term securities.