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TREASURIES-Yields fall as Bernanke pushes back tapering expectations
July 17, 2013 / 3:22 PM / 4 years ago

TREASURIES-Yields fall as Bernanke pushes back tapering expectations

* 10-year yields fall to lowest since July 3
    * Bernanke says plan to pare bond purchases is flexible
    * Fed's timing on phasing out stimulus will depend on data

    By Karen Brettell
    NEW YORK, July 17 (Reuters) - Treasuries yields fell to
their lowest levels in two weeks on Wednesday after Federal
Reserve Chairman Ben Bernanke said plans to pare its bond
purchase program are not set in stone, pushing back some
expectations of when a scaling back might begin.
    While sticking closely to a timeline he first announced last
month that the Fed would halt bond buying, or quantitative
easing, by mid-2014 when unemployment was projected to be around
7 percent, Bernanke went out of his way to stress that nothing
was certain.
    "Our asset purchases depend on economic and financial
developments, but they are by no means on a preset course," he
told the U.S. House of Representatives Financial Services
Committee in prepared remarks. 
    "He sounded a little more downbeat on the economy than the
most recent Fed policy statement. Mainly he's trying to drive
home his point that Fed policy is data-dependent and that they
are in control of any timing and pace of any QE tapering," said
Michael Lorizio, senior fixed-income trader at John Hancock
Asset Management in Boston.
    Many economists and investors had expected that the Fed will
begin reducing purchases in September, though Bernanke's dovish
tone on Wednesday led some to think that it may instead begin
next year.
    "It looks like he's not committed to putting the start of
tapering in September.the timeframe for tapering has been
pushed out," said Sean Murphy, a Treasuries trader at Societe
Generale in New York.
    Benchmark 10-year Treasuries were last up 13/32
in price to yield 2.49 percent, the lowest level since July 3
and down from 2.55 percent before the comments.
    Fed officials have tried to talk down fears over the pace in
which it will withdraw stimulus after a dramatic rise in bond
yields caught many investors by surprise, and increased concerns
that the Fed's efforts to exit from its unprecedented stimulus
would create even more volatility.
    Ten-year Treasuries yields reached two-year highs of 2.76
percent on July 8, up more than a full percentage point from the
beginning of May.
    Bernanke has also aimed to soothe markets by emphasizing
that the Fed will keep rates low for a long time to come and
that it will not sell the debt and will reinvest proceeds in new
purchases.
    The Fed views the size of its bond holdings as having a
stimulative impact on the economy by holding yields lower than
they would otherwise be, even if it is no longer continuing
purchases.

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