Friday, August 31 16:42:47
U.S. Treasuries yields fell to their lowest levels in three weeks today after Federal Reserve chairman Ben Bernanke said that still high unemployment is a "grave concern," increasing expectations that further stimulus may be likely. Bernanke said at a highly anticipated speech at a conference in Jackson Hole, Wyoming, that progress in bringing down U.S. unemployment was too slow and that the central bank would act as needed to strengthen the economic recovery. The Treasuries market was initially unsure of direction and prices were choppy before gaining as investors focused on Bernanke's bearish take on unemployment. "I think when he talks about grave concern, that says it all. Further accommodation is coming, it's just a question of how it manifests itself," said Scott Graham, head of U.S. government bond trading at BMO Capital Markets in Chicago. The Fed said at its meeting at the beginning of August that it is likely to act "fairly soon" unless the economy improves considerably. This increased speculation that the Fed would launch new easing when it holds its next meeting in September in a bid to stimulate growth and reduce stubbornly high unemployment. Despite today's market reaction, some analysts warned that it is not a given that Bernanke will launch new bond purchases in an effort to reduce stubbornly high unemployment. "He is negative on the economy, but it's not clear that it has to come through QE. Forward guidance and language is probably the place for him to act first," said Priya Misra, head of U.S. rates strategy at Bank of America in New York.