Treasuries fall and Freddie and Fannie are saved

Treasuries fell for a second day before a record sale of two-year notes as concern dropped that financial companies' losses will widen, easing the haven appeal of government debt. What seems to be overhanging the market is the perception that the Fed wants to increase the rates. In fact, Philadelphia Fed President Charles Plosser said yesterday the central bank should raise interest rates ``sooner rather than later'' to prevent price expectations from getting out of control.
Futures contracts on the Chicago Board of Trade showed a 61 percent chance the central bank will increase the target rate for overnight bank lending by at least a quarter-percentage point, up from 25 percent odds a week ago.

Inflation expectations have fallen in the past two-and-a- half weeks as the cost of a barrel of oil has dropped about 15 percent from a record $147.27 a barrel on July 11, Treasuries indicated.
The House of Representatives is set to vote today on the rescue plan for mortgage-finance companies Fannie and Freddie. The central bank's Board of Governors on July 13 authorized the New York Fed to lend directly to Fannie Mae and Freddie Mac to meet their liquidity needs if necessary.