NEW YORK: US interest rates futures fell on Wednesday as the Federal Reserve's record of its April meeting raised some concerns that it might tighten monetary policy sooner than previously thought.
The sell-off in rates futures was not so dramatic that it signals a shift in sentiment that the Fed's first rate hike would happen before the second half of 2012.
"The Fed is no more hawkish now than in our perceptions before, but they will begin make that transition by August," said Eric Green, head of US rates research and strategy at TD Securities in New York.
Federal Reserve officials worried that if oil prices continued to rise, there might be more pass-through of higher commodity costs into the broader economy, minutes of the central bank's April policy meeting released on Wednesday showed.
A few policymakers at the meeting said the increase in inflation risks meant the Fed should stand ready to tighten financial conditions sooner than had been expected.
Since the April Fed meeting, oil and other commodity prices have plummeted.
Since the beginning of the month, US oil prices have declined 20 percent. They were as low as $95 earlier this week, a level not seen since February. But even accounting for its recent drop, oil is still up 10.5 percent on the year.
Eurodollar futures closed down as much as 10 ticks, or basis points, on the day. The December 2012 contract closed 7 ticks lower at 98.64 after touching its highest level in nearly 5-1/2 months on Tuesday.
Among federal funds futures, actively traded contracts finished down 4 basis points. That implied traders still expect the Fed would not raise rates until its July 2012 meeting at the earliest.
In other parts of the US money market, Treasury bill demand remained intense, prompted by worries over dwindling supply as Washington has not reached a deal to raise the $14.3 trillion debt ceiling.
The Treasury sold $5 billion worth of 56-day cash management bills at a rate of 0.02 percent.
The bid-to-cover ratio, a measure of the amount of bidding to the amount of bills offered, tallied at a lofty 6.85.
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