Treasurys slide after Bernanke's speech

AP News
Posted: Oct 15, 2010 5:33 PM
Treasurys slide after Bernanke's speech

Federal Reserve Chairman Ben Bernanke said Friday that the central bank stands ready to buy bonds to boost the economy but offered no specific timeframe. With no new details to go on, bond traders sold off most types of Treasurys.

Bernanke said the Fed has yet to figure out the size and speed of a new bond purchasing program. The effort would be aimed at lowering interest rates to stimulate spending and prevent prices from falling.

Laying the groundwork for a move, Bernanke said there appears "to be a case for further action," given little sign of inflation and stubbornly high unemployment. He also credited the Fed's previous bond purchases with "bringing down longer-term interest rates and thereby supporting the economic recovery."

The central bank bought $1.72 trillion in mortgage bonds and Treasurys from late 2008 through this March. It's now reinvesting cash from those mortgage bonds into Treasurys.

Short-term Treasurys inched higher as traders expect the Fed to target bonds in the range of two to five years. The three-year note rose 6.25 cents, lowering the yield to 0.59 percent. The two-year yield edged down to 0.37 percent from 0.38 percent. Bond prices and yields move in opposite directions.

Bonds with longer maturities fell. In afternoon trading, the 10-year note dropped 53 cents, raising the yield to 2.57 percent from 2.51 percent late Thursday. The 30-year bond lost $1.18. The yield jumped to 3.98 percent from 3.91 percent.

In the Treasury bill market, the three-month T-bill paid a 0.13 percent yield at a discount of 0.14 percent.