Treasury Bonds Under Pressure
If you are investing in bonds at the same time trailing the current trend trading system, put greater emphasis on the former. Do you feel the pressure that that threatens treasury?
Treasury prices closed with minor losses Friday after investors largely spent the session parsing comments from Federal Reserve Chairman Ben Bernanke and finding some signals that the central bank will cut rates if necessary to pacify markets, reported Associated Press.
Ahead of the 3-day holiday weekend, investors also adjusted their positions. The move tends to leave prices near the flat line. Also, Treasury bonds fell harder and their yields increased more as a comeback in global equities markets drained off money from bonds. The bond market closed an hour early for the Labor Day holiday.
Bernanke said the central bank must take financial market disruptions into account in setting policy and will take action to ease the recent turmoil, if necessary. The Fed “stands ready to take additional steps” to boost liquidity and “will act as needed to limit the adverse effects on the broader economy that may arise from the disruptions in financial markets,” Bernanke said at the Fed conference in Jackson Hole, Wyo.
“The speech just confirmed other communications from Bernanke that the Fed is prepared to do what is needed to allow markets to be funded,” said Roger Bayston, senior vice president of the Franklin Templeton Fixed Income Group. “The bottom line is that the markets need funds to trade. There has to be a mechanism through which the markets can get funds and the Fed will provide that.”
According to the report, Bernanke’s remarks were viewed by some investors as implying that the Fed is getting ready to cut the key overnight rate at its September meeting. But the federal chairman also stress that it isn’t the Fed’s main job to protect lenders and investors from the consequences of their financial decisions.
The stock and bond markets hoped for the slashing of rates at the soonest possible time. But Bernanke’s speech did not drive price action in the Treasury market.
