Our Terms of Service and Privacy Policy have changed.

By continuing to use this site, you are agreeing to the new Privacy Policy and Terms of Service.

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

Overnight Avg Rate Latest Change Last Week
30 yr fixed4.09%4.03%
15 yr fixed3.25%3.18%
5/1 ARM3.42%3.29%
30 yr refi4.12%4.07%
15 yr refi3.29%3.19%
Rate data provided
by Bankrate.com
View rates in your area
 
Find personalized rates:
Index Last Change % Change
Dow 19,827.25 94.85 0.48%
Nasdaq 5,555.33 15.25 0.28%
S&P 500 2,271.31 7.62 0.34%
Treasuries 2.47 0.01 0.33%
Data as of 1:13am ET
Company Price Change % Change
Bank of America Corp... 22.64 0.11 0.49%
General Electric Co 30.53 -0.68 -2.18%
Bristol-Myers Squibb... 49.23 -6.26 -11.28%
CSX Corp 44.33 -1.18 -2.59%
Chesapeake Energy Co... 6.69 0.07 1.06%
Data as of Jan 20

Sections

Shares of several uranium miners are soaring this year on hopes that Donald Trump will commit more investments to nuclear power. But investors need to get careful. The stocks are as volatile as radioactive elements. More

President Trump promised to 'buy American and hire American.' He says his policies will create 25 million new jobs, the most of any U.S. president in history. CNNMoney lays out just how hard that will be. More

Senators Chuck Grassley and Dick Durbin plan to reintroduce their bill for revamping the popular H-1B visa program. More

If you're smart about when you first claim Social Security, you can increase your benefits and reap the rewards for the rest of your life. More