Treasuries pare losses slightly ahead of Bernanke speech

LONDON (BestGrowthStock) – U.S. Treasuries nudged higher in Europe ahead of Federal Reserve chairman Ben Bernanke’s speech on Friday, going some way to pare sharp losses sparked by poor demand at a 30-year auction on Thursday.

Bernanke will give his speech on “Monetary Policy Objectives and Tools in a Low-Inflation Environment” at a Fed Bank of Boston conference at 1215 GMT.

With further QE already priced into the market, investors are hoping he will provide more clarity on the timing and scale of further monetary stimulus measures from the central bank.

One trader warned any indication of hawkish sentiment among Fed officials from Bernanke would damage high QE expectations in the bond market.

“We think anything he says on QE is going to be market friendly. But if he’s not very bullish the market is going to test some levels, namely 4 percent on long bonds” he said.

Treasuries fell across the curve on Thursday evening after a $13 billion auction of 30-year bonds fetched a high yield of 3.852 percent, reflecting poor demand.

Yields on 30-year bonds rose to a three-week high of 3.9160 percent before slipping back to 3.889 percent on Friday.

At 1013 GMT (6:13 a.m. EDT), 10-year Treasury yields were down 2 bps at 2.4860 percent, while two-year yields inched 1.2 bps lower to 0.3710 percent. Treasury note futures climbed 2/32 to 126-47/64.

Investors will also be keeping an eye out for key U.S. inflation data from the core CPI index, forecast to come in at 0.1 percent.

“CPI data is an important element with regards to the overall debate on disinflation. We expect it to stay sub one percent,” said Padhraic Garvey, head of investment grade debt strategy at ING.

(Reporting by Nia Williams; Editing by Toby Chopra)

Treasuries pare losses slightly ahead of Bernanke speech