TREASURIES-Bernanke disappointment pummels bonds

* Bernanke signals no new bond buying by Fed imminent

* Long bonds down 3 points but most maturities hit

* Not-so-grim GDP data encourages profit-taking
(Adds details, quote, latest prices)

By Burton Frierson

NEW YORK, Aug 27 (BestGrowthStock) – U.S. Treasuries fell sharply
on Friday after Federal Reserve Chairman Ben Bernanke signaled
no new bond buying by the central bank was imminent, triggering
the worst sell-off in three months.

Although Bernanke did mention such purchases as a
possibility, investors found nothing in his comments to
indicate the Fed has any immediate plans to stimulate the
slowing economy through an expansion of current bond buying.

For a market already at rich levels, this was an important
nuance that further fueled a sell-off ignited after data
earlier on Friday showed economic growth was not quite as weak
as expected in the second quarter.

Although the Fed did say on Aug. 10 it would use cash from
maturing mortgage bonds it holds to buy more government debt,
the market was gearing up for even more quantitative easing due
to a poor run of economic indicators in recent weeks.

“Apparently there was a lot of unfounded hope that Bernanke
was going to indicate that additional quantitative easing was
going to take place sooner rather than later,” said Mary Ann
Hurley, vice president of fixed-income trading at D.A. Davidson
& Co. in Seattle.

“He clearly indicated that it will happen if needed and
that ‘if needed’ is very important.”

The 30-year long bond (US30YT=RR: ) was down three points on
the day, yielding 3.67 percent versus Thursday’s close of 3.51
percent.

Broadly speaking, the bond market was on track for its
worst one-day sell-off in three months, based on the rise in
10- and 30-year yields.

However, even if the selloff holds, the 30-year bond yield
would only be about one basis point higher on the week,
signaling the intensity of the rally in previous days.

The benchmark 10-year note (US10YT=RR: ) fell more than a
point and was last down 1-11/32 in price, yielding 2.64 percent
versus Thursday’s close of 2.48 percent.

If the sell-off gains additional momentum, traders will be
watching to see if support holds at 2.67 percent in 10-year
notes.
(Additional reporting by Richard Leong; Editing by Leslie
Adler)

TREASURIES-Bernanke disappointment pummels bonds