Bonds climb on Bernanke blues

chart_ws_bond_10yearyield.top.pngClick the chart for current prices and yields. By Annalyn Censky, staff reporter


NEW YORK (CNNMoney.com) -- Treasuries started climbing early Monday, as Fed Chairman Ben Bernanke's pessimistic comments about the job market over the weekend boosted the safe-haven appeal of U.S. government debt.

In a rare interview on CBS' 60 Minutes Sunday, the Federal Reserve chairman said it could be four or five years before the economy returns to a normal unemployment rate. Bernanke also said that fears of long-term inflation are overstated, and that the central bank could resort to yet another round of Treasury purchases, or so-called quantitative easing, if necessary.

High unemployment was one reason the Federal Reserve decided to start buying $600 billion in Treasuries in November, as a way to stimulate the economy by keeping interest rates low and encouraging consumers to spend more and businesses to create jobs.

Anticipation for the program had lent support to the bond market up until mid November, when both stock and bond markets became more volatile as investors teetered between fears about Europe's debt crisis and stronger economic reports out of the U.S.

Now, Bernanke's comments that another round of quantitative easing could be in the cards put reservations about the U.S. economic recovery back in the spotlight.

Since U.S. Treasuries are considered a low-risk asset in times of uncertainty, those comments, combined with a weak jobs report on Friday were enough to drive investors back to bonds.

"The bottom line is the Fed could continue on with [quantitative easing], and that would keep rates artificially low," said Kenneth Naehu, managing director and head of fixed income at Bel Air Investment Advisors. "The economy's weakness could continue. Those two factors would bode for rates to stay relatively low."

When traders speculate a large buyer like the government may be coming into the bond market, the anticipation of more demand and less supply drives prices up.

In turn, yields -- which move in the opposite direction -- fall.

On Monday morning, the yield on the benchmark 10-year note fell to 2.96%, backing further away from its four-month high above 3% reached last week. The 30-year yield slid to 4.28%.

The yields on the 2-year note fell to 0.46% and the 5-year note slipped to 1.56%. To top of page

Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Overnight Avg Rate Latest Change Last Week
30 yr fixed3.90%3.85%
15 yr fixed3.07%3.00%
5/1 ARM3.14%3.02%
30 yr refi3.96%3.92%
15 yr refi3.12%3.10%
Rate data provided
by Bankrate.com
View rates in your area
 
Find personalized rates:
Index Last Change % Change
Dow 18,232.02 -53.72 -0.29%
Nasdaq 5,089.36 -1.43 -0.03%
S&P 500 2,126.06 -4.76 -0.22%
Treasuries 2.22 0.03 1.37%
Data as of 7:49am ET
Company Price Change % Change
Bank of America Corp... 16.75 0.02 0.12%
Apple Inc 132.54 1.15 0.88%
Hewlett-Packard Co 34.76 0.93 2.75%
AT&T Inc 34.71 -0.36 -1.03%
Microsoft Corp 46.90 -0.52 -1.10%
Data as of May 22

Sections

The record airbag recall and the GM ignition switch recalls has resulted in a huge percentage of cars on the road today having been recalled. More

The True Cost, a new documentary, chronicles the evils of the clothing industry and asks us to stop buying so much cheap stuff More

Sarah Kauss launched S'well to rid the world of plastic water bottles. In five years, she's sold 4 million of her stainless steel bottles. More