Long-term Hong Kong interest rates have risen an average of 20 basis points amid expectations of a rise in US rates. SAR banks joined foreign banks in buying US dollar forwards in anticipation of a 25 basis-point increase in US rates in the third quarter. The five-year interest rate swap breached the psychologically sensitive 7 per cent level yesterday to reach 7.1 per cent, up from 6.9 per cent on Wednesday. The 10-year interest rate swap also rose, from 7.2 per cent to 7.35 per cent. The seven-year rate gained 15 basis points to 7.25 per cent. The increases mirrored similar adjustments in the US on Wednesday when the yield on 30-year Treasury paper breached its recent trading range of 5.4-5.6 per cent to reach 5.72 per cent. The yield on two-year paper advanced to 5.1 per cent from 4.95 per cent. The rises were prompted by intensifying pressure on commodity and labour market prices and indicated the market anticpated a 25 basis-point increase in the third quarter, traders said. They said US investment banks had begun snapping up outright US dollar forwards since Wednesday. Hong Kong banks, which had acted as counter-parties for these buying orders, yesterday gave up and joined the buying spree, further accelerating the increases. The one-year forward premium rose from Wednesday's 650 points to 790 points, equivalent to a money market rate of 6.375 per cent. The six-month premium gained 40 points to 220, equivalent to a money market rate of 5.5625 per cent. The rises put pressure on the Hong Kong dollar spot exchange rate, pushing it to the day's low of $7.75.