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Treasuries Close Firmly Negative On Data, Bernanke Testimony

Treasuries showed a notable move to the downside on Wednesday, as upbeat U.S. economic data and comments from Federal Reserve Chairman Ben Bernanke dampening the outlook for further quantitative easing reduced the appeal of bonds.

After initially showing a lack of direction, bond prices moved firmly into negative territory over the course of the morning. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 4.8 basis points to 1.977 percent.

The weakness among treasuries was partly due to the release of a Commerce Department report showing that the U.S. economy expanded by more than previously estimated in the final three months of 2011.

The report showed that GDP increased at an annual rate of 3.0 percent in the fourth quarter, reflecting an upward revision from the 2.8 percent growth that was initially estimated. The upward revision surprised economists, who had expected GDP growth to be unrevised.

A separate report from the Institute for Supply Management - Chicago showed that business activity in the Chicago-area expanded at a faster than expected rate in the month of February.

Bernanke's remarks also contributed to the pullback by bonds, as the Fed chief refrained from discussing the possibility of further quantitative easing despite acknowledging that the pace of the U.S. economic expansion has been uneven and modest by historical standards.

In testimony before the House Financial Services Committee, Bernanke also warned of lingering weakness in the labor market, saying, "The job market remains far from normal."

Treasuries saw continued weakness following the release of the Fed's Beige Book report, which said overall U.S. economic activity continued to increase at a modest to moderate pace in January and early February.

Trading on Thursday could be impacted by the release of a slew of U.S. economic data, including reports on weekly jobless claims, personal income and spending, and national manufacturing activity. Bernanke is also due to return to Capitol Hill to testify before the Senate Banking Committee.

by RTT Staff Writer

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