US Treasuries rallied on Wednesday, with two-year yields at record lows, after Federal Reserve Chairman Ben Bernanke said the economy faced "unusually uncertain" prospects, suggesting low inflation and low interest rates for a long time.
Bernanke's testimony before the Senate Banking Committee jolted the bond market from its slumber. The 30-year bond led the rally, rising nearly 2 points in price, as traders bet long-dated issues would fare better than short-dated ones in a low-growth and tame inflation climate. The jump in bond prices was also driven by increased safety bids, as the stock market lost more than 1 percent in reaction to Bernanke's remarks.
Bernanke will testify before a House panel on Thursday. "People are very uncertain and are very protective of the assets they have," said Cam Albright, director of economic research at Wilmington Trust in Wilmington, Delaware.
The benchmark 10-year note rose 21/32 in price to 105-9/32. Its yield, which moves opposite to price, last traded at 2.88 percent, down from 2.96 percent late Tuesday. The 10-year yield neared a 15-month low of 2.855 percent, while the two-year yield set a record low of 0.556 percent, according to Reuters data.
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