BOND REPORT: Treasurys Down After Bernanke Says Fed May Buy U.S. Debt
January 13 2009 - 8:48AM
Dow Jones News
By Deborah Levine
Treasury prices declined Tuesday as yields moved higher, with
bond traders playing off Federal Reserve chief Ben Bernanke's
comments restating that the U.S. central bank could buy longer-term
Treasurys to keep loan rates low.
More aid to the banking system would be needed to foster an
economic recovery, Bernanke also said in a speech he delivered in
London.
Two-year note yields (UST2YR) rose 4 basis points to 0.79%. A
basis point is one one-hundredth of a percent.
Ten-year note yields (UST10Y) were little changed at 2.31%.
The timing and strength of any global recovery remain "highly
uncertain," Bernanke said.
The Fed has begun a plan to buy billions of dollars in
mortgage-backed securities and debt sold by housing agencies
including Fannie Mae (FNM) and Freddie Mac (FRE) to lower mortgage
rates and spur growth in the housing market.
So far, the program has been successful in bringing down
mortgage rates by reducing the gap between Treasurys, a benchmark
for many types of loans, and yields on mortgage or agencies
bonds.
Bernanke also said it may expand its program to buy asset-backed
securities, which pool borrowings such as car loans and credit-card
debt.
Also Tuesday, a government report showed the U.S. trade deficit
in November plunged to $40.4 billion, reflecting weakening demand
for imports as the nation's economic woes deepened.
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