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- * Bernanke says high unemployment a "grave concern" * Benchmark yields touch lowest since early August * Investors look ahead to August employment figures By Chris Reese NEW YORK, Aug 31 (Reuters) - U.S. Treasury prices rose...
Sat Sep 1, 2012 12:57am IST
* Bernanke says high unemployment a "grave concern" * Benchmark yields touch lowest since early August * Investors look ahead to August employment figures By Chris Reese NEW YORK, Aug 31 (Reuters) - U.S. Treasury prices rose andyields fell to the lowest in three weeks on Friday after FederalReserve Chairman Ben Bernanke said that still high unemploymentis a "grave concern," increasing expectations that furtherstimulus may be likely. Bernanke said in a highly anticipated speech at a conferencein Jackson Hole, Wyoming, that progress in bringing down U.S.unemployment was too slow and that the central bank would act asneeded to strengthen the economic recovery. Bernanke's take on unemployment bolstered expectations ofmore Fed stimulus, perhaps as soon as the central bank's nextpolicy meeting Sept. 12-13, which benefited Treasuries. "Bernanke stopped short of signaling a September move butchances remain very high that additional steps will be taken bylater this year or next," said Robert DiClemente, chief U.S.economist at Citigroup in New York. Benchmark 10-year Treasuries on Friday traded20/32 higher in price to yield 1.56 percent, marking the lowestsince Aug. 7 and down from 1.63 percent late Thursday. Whileyields were down on the day, they posted the biggest monthlyrise in August since March. "I think when (Bernanke) talks about grave concern, thatsays it all. Further accommodation is coming, it's just aquestion of how it manifests itself," said Scott Graham, head ofU.S. government bond trading at BMO Capital Markets in Chicago. The Fed said at its meeting at the beginning of August thatit is likely to act "fairly soon" unless the economy improvesconsiderably. This increased speculation the Fed would launch new easingat its September meeting in a bid to stimulate growth and reducestubbornly high unemployment. Despite Friday's market reaction, some analysts warned thatit is not a given that Bernanke will launch new bond purchases. "He is negative on the economy, but it's not clear that ithas to come through QE. Forward guidance and language isprobably the place for him to act first," said Priya Misra, headof U.S. rates strategy at Bank of America in New York. Some see the Fed as likely to extend its language forkeeping interest rates near zero beyond the current time frameof at least through late 2014. New economic data, including a key employment number nextFriday, will also be closely scrutinized as an indication ofwhether the Fed is likely to act as soon as September. "If the payroll number is weak then I would say this marketreaction is fair, but if we get an okay payroll number next weekI would say that this pricing has to be taken out," said Misra. Thirty-year bonds traded 1-13/32 higher in priceto yield 2.68 percent, down from 2.75 percent late Thursday.
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