Treasury yields rose from almost record lows as Federal ReserveChairman Ben S. Bernanke said the economy will accelerate after the weakest six months of its recovery without immediate additional stimulus.
U.S. debt pared weekly losses yesterday as Bernanke said at a conference in Jackson Hole, Wyoming that the central bank has tools to stimulate the economy without signaling when or whether policy makers might deploy them. The U.S. sold $99 billion of two-, five- and seven-year notes this week at all-time low auction yields. A government payrolls report Sept. 2 is forecast to show the U.S. gained 75,000 jobs in August, down from 117,000 added the previous month.
“Any weakness in the economy is good for Treasuries,” said David Coard, head of fixed-income trading in New York at Williams Capital Group, a brokerage for institutional investors. Bernanke “wasn’t going to commit to any further accommodation or quantitative easing. We would have to see more weakness to get more accommodation.”
Yields on 10-year notes rose 13 basis points on the week to 2.19 percent yesterday in New York, according to Bloomberg Bond Trader prices. The 2.125 percent securities maturing in August 2021 fell 1 1/8, or $11.25 per $1,000 face amount, to 99 13/32.
Thirty-year bonds yields increased 15 basis points to 3.54 percent.
Treasury Returns
U.S. government securities have returned 2.9 percent in August in their best monthly performance since the depths of the financial crisis in December 2008, according to a Bank of America Merrill Lynch index. Investors sought the security of debt while stocks tumbled, sending the MSCI All Country World Index of shares down 11 percent.
A plunge in world stock markets in August coupled with concern the pace of U.S. growth was slowing led to speculation earlier in the month that the Fed chief would use yesterday’s speech to announce another round of bond buying. In his Jackson Hole speech last year he announced the Fed would “do all that it can” to spur the economic recovery. He went on to implement a $600 billion debt-purchase plan in November.
As this year’s speech date approached, focus shifted to signs of higher inflation as dimming the chances for more debt purchases by the central bank.