Benchmark yields rise from record- or near-record lows
By Deborah Levine, MarketWatch
NEW YORK (MarketWatch) — Treasury prices pared a decline on Tuesday, leaving benchmark yields just above their record lows, as Federal Reserve Chairman Ben Bernanke gave no details or bigger hints of further easing measures in his testimony to Congress.
Yields on 10-year notes 10_YEAR -0.20% , which move inversely to prices, stayed up 1 basis point to 1.49%. A basis point is one one-hundredth of a percentage point.
On Monday, the benchmark security’s yield touched 1.4383%, retouching the prior all-time low.
Five-year-note yields 5_YEAR -0.66% were little changed at 0.60%, after setting new lows on Monday.
Yields on 30-year bonds 30_YEAR -0.16% erased a small rise to trade little changed at 2.57%. They closed at their lowest since June 1 but remain a little above their record low of 2.505% set in December 2008.
Bernanke said economic data was “generally disappointing” and the economy faces headwinds from a potential euro-area fiscal and banking crisis and massive U.S. fiscal cuts and tax increases slated to kick in at the end of the year. The central bank remains ready to take further action, he repeated, but didn’t give any details. See story on Bernanke.
“If you’re looking for hints about what the Fed’s going to do, you won’t find it here in the prepared testimony,” said David Ader, head of government bond strategy at CRT Capital Group.
Analysts expected Bernanke to express a greater degree of concern about the economy and reinforce the Fed’s commitment to supporting growth. Read more expectations of Bernanke.
Many analysts had been expecting him to hint at another round of bond purchases — known as quantitative easing — coming soon, while another option for the Fed is to push out its forecast for interest rates to stay on hold until late 2013. It could also cut the interest paid on excess reserves held at the Fed, to encourage banks to lend out the funds.
But none of that was mentioned, sucking gains from U.S. stocks and turning the dollar higher. See more about dollar, Bernanke.
Before the testimony, Bill O’Donnell, head of Treasury strategy at RBS Securities said “hopped-up hopes for additional Fed stimulus are at greater risk of being disappointed today rather than pleasantly surprised. So I have no love for Treasurys right here.”
Bonds showed little reaction to a report that said consumer prices were flat in June and core prices, excluding food and energy, rose 0.2%. Both were in line with economists’ estimates. Read more on consumer prices.
Separate reports also showed foreign investors bought more Treasury bonds in May, industrial production rose 0.4% in June and confidence among home builders surged this month. See story on industrial production.
Deborah Levine is a MarketWatch reporter, based in New York.
