U.S. Treasury yields fell Thursday after a dose of poor economic news and cautious comments by Federal Reserve Chairman Ben Bernanke.
Bernanke said Thursday afternoon that he's surprised by the weakness of consumer spending since the recession ended. He said the Fed's policy-making group will consider measures to reinvigorate the economy later this month.
Bernanke offered no specifics on the committee's policy options or its intentions. His comments echoed a speech last month, in which he supported Congress' efforts to reduce budget deficits over the long run but cautioned against rapid cuts while the economy remains so weak.
Many economists expect the Fed to agree on further action to drive down long-term interest rates when the committee meets Sept. 20-21. One option is for the central bank to reduce the amount of short-term U.S. debt it holds and increase its holdings of long-term Treasury securities. Another is to expand the Fed's balance sheet by starting another round of bond-buying.
By reducing long-term rates, the Fed hopes to increase lending and encourage investors to make riskier bets such as buying stocks.
Treasury prices typically rise when traders think that Fed intervention looks more likely. That pushes yields lower.
Poor economic news also helped boost demand Treasurys. The government said early Thursday that more people had applied for unemployment benefits last week than the week before.
The yield on the 10-year Treasury note dipped to 1.99 percent at 3:05 p.m. Thursday from 2.04 percent late Wednesday. Its price rose 53 cents for every $100 invested.
The note had a rollercoaster session. Its yield dipped to 1.98 percent before 9 a.m., after the unemployment news. The yield bounced to 2.04 percent before noon, then drifted back down as Bernanke's comments came out.
A 10-year yield below 2 percent is very low by historic standards. The yield was 3.29 percent at the beginning of the year. The yield is used as a benchmark for interest rates on many kinds of loans including mortgages. However low borrowing costs have done little to revive the housing market or encourage businesses to hire.
On Monday, the 10-year yield fell to 1.91 percent, the lowest since the Federal Reserve Bank of St. Louis began keeping daily records in 1962. If the Fed acts to lower long-term rates, analysts expect the yield to fall further.
In other trading, the yield on the 30-year Treasury bond fell to 3.31 percent from 3.36 percent late Wednesday. Its price rose $1.09 for every $100 invested.
The two-year note's yield fell to 0.19 percent from 0.20 percent.
The three-month T-bill's yield fell to 0.01 percent from 0.02 percent. Its discount wasn't available.