Investors find cause for concern

NEW YORK – Investors are nervous and the stock market shows it; for every step forward, it seems to take three back. And despite relatively strong corporate earnings, a decent jobs picture and red-hot housing market, investors still worry about the possibility of a prolonged “soft patch.”

Meanwhile, analysts are warily watching the yields on Treasury notes and bonds, wondering what signals to read into their range-bound moves as the Federal Reserve is expected to raise overnight borrowing costs again on Tuesday. If the policy-makers act as expected, they’ll hike the federal funds rate by 25 basis points to 3.0 percent. It will be the eighth such increase since the Fed began tightening credit in June 2004.

During that time, yields on long bonds have remained in a stubborn range, essentially going nowhere even as short-term rates rise.

“Interest rates today are lower than they were when the Fed began this exercise of raising interest rates. It’s really dumbfounding,” said Margie Patel, senior vice president of Pioneer Investments and manager of four fund portfolios.

To Patel, what that suggests is that despite upswings in commodity prices, the long-term outlook for inflation is fairly muted. Investors seem comfortable with intermediate Treasury yields in the range where they are, and she doesn’t think they’ll go substantially higher for a while.