US: Bond traders don't expect surprise rate rise

Interest-rate derivatives show traders anticipate economic growth that fails to spark runaway inflation even as global food and energy prices soar and the Federal Reserve pumps $600 billion into the financial system by purchasing bonds. Based on where they see 10-year swap rates in a decade, the cost to lock in fixed rates in exchange for floating interest payments is the same now as it was before the worst financial crisis since the Great Depression.

The World Bank’s food-price index climbed 15 percent between October and January, and President Robert Zoellick said on Feb. 16 that rising food prices have been an “aggravating factor” in the unrest in Africa and the Middle East. The gauge is 3 percent below its 2008 peak, when surging costs sparked riots in more than a dozen countries.

Fed policy makers don’t expect increases in commodity prices to filter into broader inflation permanently, according to the minutes from the Jan. 25-26 Federal Open Market Committee meeting released last week.