Treasurys fall after Bernanke
Bond prices fell Wednesday after Federal Reserve chairman Ben Bernanke told Congress that interest rates will stay low for "an extended period."
What prices are doing: The benchmark 10-year note ticked down 1/32 to 99-14/32, pushing the yield up to 3.69% from 3.68% late Tuesday. Bond prices and yields move in opposite directions.
The 30-year bond lost 2/32 to trade at 99-26/32 and its yield was 4.63%. The 2-year note ticked down 2/32 to 100 and yielded 0.86%.
What’s driving prices: On Wednesday morning Bernanke testified about monetary policy before the House Financial Services Committee. He expressed belief that government action has helped start an economic recovery, but many concerns persist — namely, the state of the job market.
Bernanke repeated that the federal funds rate, which is the central bank’s primary tool for monetary policy, is likely to stay low for an extended period make quick cash.
What experts are saying: "Bond prices are moving lower on the back of that testimony," said Peter Cardillo, chief market strategist at Avalon Partners.
Also giving support to safe-haven Treasurys, Cardillo noted, was a "dismal and discouraging" report that showed sales of new homes plunged 11.2% in January to the lowest level on record.
The government also auctioned 5-year notes Wednesday. The bid-to-cover ratio, a measure of demand, was 2.75, compared to 2.8 at the last 5-year note auction in January.
Cardillo said he expects Treasury trade to be choppy in the short- to medium-term, depending on economic data. Unemployment figures will be key, he said, and the benchmark 10-year yield could near the 4% level.
Filed under: money by Wolf