Fed Easing May Kill Long Bond Rally With Switch From Inflation Focus

Bloomberg reports:

The rally in 30-year Treasury bonds, the most profitable U.S. government securities the past 15 months, may become a casualty of the Federal Reserve's efforts to ease a widening credit crunch.

Yields on so-called long bonds will increase because Fed Chairman Ben S. Bernanke may lower borrowing costs and cause consumer prices to rise at a faster pace, said Brian Carlin, head of fixed-income trading at JPMorgan Private Bank.

Investors will demand a ``higher risk premium,'' said Carlin, who helps oversee $100 billion of bonds in New York. ``Fed cuts may, in fact, turn out to be quasi-inflationary.''

Do you think mortgage rates are really going to go down if the 30 Year Treasury Bond loses value?