Yields on two-year Treasuries, among the securities most sensitive to monetary policy, yesterday fell the most since August after Fed Chairman Ben S. Bernanke said the central bank may slow the pace of interest-rate increases. Yields on 10-year notes, more sensitive to inflation, didnt fall as much because of concern a pause would spur consumer prices higher.
We interpret the comments by Fed Chairman Bernanke in his testimony before the Joint Economic Committee as being dovish, according to the report from Barclays Capital Inc.s U.S. fixed- income team, which includes Robert Tzucker, a bond strategist in New York. The difference between short-term notes and longer- dated securities may widen as increased inflation expectations are priced in.The yield on the benchmark 4.5 percent note due February 2016 fell 1 basis point, or 0.01 percentage point, to 5.06 percent as of 1:59 p.m. in Tokyo, according to bond broker Cantor Fitzgerald LP. The yield on the 4 7/8 percent note due April 2008 fell 2 basis points to 4.88 percent. Its yield dropped 9 basis points yesterday, the most since Aug. 31. The difference between yields on two-year notes and 10-year securities widened to 18 basis points, the most since November 4. Even if in the committees judgment the risks to its objectives are not entirely balanced, at some point in the future the committee may decide to take no action at one or more meetings in the interest of allowing more time to receive information, Bernanke said.