Treasuries fall on rising inflation concerns

NEW YORK (CNNMoney) -- Treasury prices fell Wednesday as concerns about rising inflation and the outlook for interest rates in Europe and the United States took center stage.

On Thursday, the European Central Bank is expected to raise interest rates -- a move aimed at battling long-term inflation.

The ECB's potential move would come just days after the People's Bank of China just hiked interest rates for the fourth in time in six months.

The interest rate hikes leave the Federal Reserve as the odd man out. The central bank has kept interest rates near 0% since December 2008 and that's starting to make investors nervous that inflationary pressures may hit sooner rather than later.

"There's some concern about inflation," Williams Capital Group fixed income analyst David Coard said. He said there's also some renewed talk about how much the Fed will stick to its guns when it comes to ending QE2.

QE2 or "quantitative easing" program is the central bank's program aimed at spurring economic growth by flooding the system with liquidity.

On Tuesday investors mulled over the outlook for interest rates after minutes released from the Federal Reserve showed Tuesday that central bank officials are at odds about rising prices.

"Investors want to move into something that will give them a higher return," fixed income analyst Kim Rupert said. And that may mean investors will start to make a bigger push into equities, which offer a higher return.

Rupert says a number of factors weigh into investors' overall outlook: "the feeling is that the stock market is going to go higher, the economy is looking okay, earnings are coming out on the positive side," she said.

The price on the benchmark 10-year U.S. Treasury fell, pushing the yield up to 3.55% from 3.49% late Tuesday. The 30-year yield rose to 4.6%, the 5-year yield ticked up to 2.32%, and the 2-year note was at 0.85%. Bond prices and yields move in opposite directions.