Short rates rise on fears that Fed will tighten.

Short-term interest rates rose Wednesday on concerns about high commodity prices and a Federal Reserve tightening.

At 4 p.m., the bond-equivalent yield on three-month Treasury bills was up to 3.11% from 3.02% on Tuesday.

"Bills are trading as if the Fed left the pro-tightening bias intact," said Astrid Adolfson, economist at MCM MoneyWatch, said.

The Federal Open Market Committee on Wednesday concluded a two-day meeting to set policy for the next six weeks.

Leeway of 50 Basis Points

The FOMC does not divulge the results of its talks until six weeks after the meeting, but market analysts think a sharp run-up in commodity prices convinced the panel to maintain the current pro-tightening bias.

Under this policy directive, Federal Reserve Board Chairman Alan Greenspan can raise the target for the federal funds rate 50 basis points higher without further consultation with the other FOMC members. The target is currently 3%.

Many economists had expected the Fed to change to a neutral stance after the government's report last Friday that only 13,000 jobs were added in June.

A sharp rise in commodity prices was related in large part to floods in the Midwest wiping out crops. The government estimated $1 billion in crop losses and damage from the flooding.

The Commodity Research Bureau's index, a gauge of 21 futures prices, rose 5.29 points to 217.30 on Tuesday, the biggest rise since 1988. Coupled with a big rise in gold, the CRB jump re-ignited inflation fears and sparked a selloff in the government securities market.

Commodities prices settled down Wednesday, with the CRB falling 0.07 point to 217.23.

The yield on the 30-year Treasury bond rose to 6.68% from 6.67%.

Stocks rose in what market analysts described as a technical rebound after five days of losses. The Dow Jones industrial average gained 25.74 points to 3,475.67.

The dollar was mixed. It finished New York trading at 1.7060 German marks, up from 1.7050, and at 107.55 yen, down from 108.84.

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