SF: Treasuries Fall, Dollar Rises as Stocks Erase Gains on Bernanke
Feb. 29 (Bloomberg) -- Treasuries fell, the dollar rallied and U.S. equities erased gains after Federal Reserve Chairman Ben S. Bernanke's remarks to Congress damped speculation of more quantitative easing to bolster the economy.
The 10-year U.S. Treasury note yield increased two basis points to 1.97 percent and the Dollar Index rose 0.3 percent after falling 0.2 percent earlier. The Standard & Poor's 500 Index was little changed at 1,372 at 10:39 a.m. in New York after rising as much as 0.4 percent earlier.
While Bernanke told Congress that keeping monetary stimulus is warranted, he said rising gasoline prices are likely to push up inflation temporarily and the drop in the unemployment rate has been more rapid than expected. The U.S. economy expanded at a 3 percent annual rate in the fourth quarter, more than forecast, as companies rebuilt inventories in anticipation of growing demand.
"The market is interpreting what Bernanke said as no more QE," said Paul Horrmann, a broker in New York at Tradition Asiel Securities Inc., an interdealer broker. "That's why the markets came off."
Yields on 30-year Treasury bonds increased one basis point to 3.09 percent and two-year rates rose less than one point to 0.30 percent. The dollar strengthened 0.5 percent to $1.3392 against the euro, reversing a 0.2 percent retreat.
While describing "positive developments" in the labor market, Bernanke said "the job market remains far from normal" during the first day of his semi-annual monetary policy report to Congress.
Bernanke's remarks "were most notable for what he did not say," according to a note to clients from Goldman Sachs Group Inc.'s chief economist, Jan Hatzius. "The Chairman gave no clear signal that the committee is considering further monetary easing in the near future."
U.S stocks extended a global rally earlier after the European Central Bank provided lenders with a larger amount of cash than forecast. The ECB allotted 529.5 billion euros ($712 billion) in three-year funds. Economists predicted 470 billion euros, a Bloomberg survey showed.
"It's stopped the fears about systemic risk," Patrick Legland, head of research at Societe Generale SA, said in a Bloomberg Television interview about the ECB loans. "This is very good. What we need is step two -- additional measures to support the economy. This is a movement in the right direction."
