July 21 (Bloomberg) -- U.S. 10-year Treasuries fell in Asia on speculation the Federal Reserve will raise interest rates at all its remaining meetings this year after Chairman Alan Greenspan said a slowdown in consumer spending ``should prove short-lived.''

Greenspan's testimony yesterday spurred expectations the Fed will raise the 1.25 percent lending rate between banks by a quarter point at each of the four meetings left in 2004. The decline in bonds trimmed gains that pushed 10-year yields down as much as half a percentage point since June, when the economy added fewer jobs and consumer prices rose less than some had forecast.

``Greenspan's comments refreshed investors' minds that rate hikes are still awaiting,'' said Hidetaka Namiki, head bond trader at the Tokyo unit of Banc of America Securities LLC, one of 22 primary government securities dealers that trade with the Fed's New York branch. ``Whatever highs we've seen lately will probably be the high for this year, and Treasuries will fall from here.''

The benchmark 4 3/4 percent note due May 2014 fell 1/8, or $1.25 per $1,000 face amount, to 102 8/32 at 1:15 p.m. in Singapore, according to New York-based bond broker Cantor Fitzgerald LP. Its yield rose 1 basis point to 4.46 percent. A basis point is 0.01 percentage point.

Investors are demanding higher yields, which move inversely to prices, amid rising expectations the Fed will push interest rates higher. The yield on the 10-year Treasury note may rise to 4.6 percent in coming weeks, Namiki said.

Jobs Report

Traders have pared expectations for the pace of the Fed's interest-rate increases and investors pushed the 10-year note's yield down to 4.35 percent on Friday -- the lowest since April -- from the high on June 14 of 4.88 percent after reports on the consumer price index in May and June showed inflation was slower than expected.

The economy added 112,000 workers in June, fewer than half the number economists had forecast, heightening speculation the Fed won't need to speed up interest-rate increases. The Fed's policy-setting Open Market Committee on June 30 raised their key rate to 1.25 percent from 1 percent, the first increase since May 2000.

June retail sales fell 1.1 percent a report last week showed, the largest drop since February of last year.

Rising energy prices account for declines in consumer spending ``that should prove short-lived,'' Greenspan told the Senate Banking Committee. ``With the growth of aggregate demand looking more sustainable and with employment expanding broadly, the considerable monetary accommodation put in place starting in 2001 is becoming increasingly unnecessary.''

Futures contracts tied to interest-rate expectations show traders are raising bets that the Fed will raise its target rate for overnight bank loans to 2 percent by year-end. The yield on the December federal funds futures contract rose to 2.075 percent from 2.01 percent. The yield is the expected average rate for a month.

At 1.43, the yield on the August fed funds futures contract indicated that traders expect a 25 basis point increase, or tightening, to 1.50 percent, at the central bank's Aug. 10 meeting.

``We are in a tightening phase, and the bond-negative bear market will continue,'' said Yoshitaka Majima, who oversees $4 billion in bonds at Merrill Lynch Investment Management in Tokyo, a unit of the world's biggest securities firm by capital.

Yields on 10-year Treasuries may rise to 4.9 percent in coming months, Majima said.

Inflation Pick-Up

Investors will look for more signals about the pace of any interest-rate increases when Greenspan speaks to the House Financial Services Committee today. Fed policy makers Anthony Santomero, Roger Ferguson and Robert McTeer are also scheduled to speak at separate events today.

The FOMC predicted its preferred inflation measure, the personal consumption expenditures price index excluding food and energy, will rise to a range of 1.5 percent to 2 percent this year, and as much as 2.5 percent next year.

Greenspan said policy-makers will be vigilant in changes to economic data that might boost the pace of price increases. He also said the central bank can continue to raise interest rates at a ``measured'' pace, and reiterated a pledge to raise rates more aggressively if necessary.

``We cannot be certain that this benign environment will persist and that there are not more deep-seated forces emerging as a consequence of prolonged monetary accommodation,'' he said. ``Accordingly, in assessing the appropriateness of the stance of policy, the Federal Reserve will pay close attention to incoming data, especially on costs and prices.''

To contact the reporter on this story: Shamim Adam in Singapore sadam2@bloomberg.net

Last Updated: July 21, 2004 01:59 EDT