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Treasuries Close Up After Bernanke's Speech

MARKETSCOPE: Treasury bond prices closed modestly higher on Wednesday, after the new Federal Reserve Chairman Ben Bernanke's testimony to Congress held no surprises.

The benchmark 10-year note edged up 02/32 to 99-07/32 for a yield of 4.60%, while the 30-year bond rose 09/32 to 98-28/32 for a yield of 4.47%.

Bernanke said the U.S. expansion remains on track and the economy's momentum may lead to some overheating. He largely reiterated the Jan. 31 Federal Open Market Committee statement that some further rate increases may be necessary. He also said future Fed decisions are "increasingly dependent" on data, but the Fed will be flexible in its decisions, according to Action Economics.

"We have a hard time trying to put a hawkish or dovish spin on Chairman Bernanke's prepared remarks -- they are extremely evenhanded," says Joseph Lavorgna, and analyst at Deutsche Bank in New York.

Under former Federal Reserve Chairman Alan Greenspan's leadership, the Federal Open Market Committee has hiked rates 13 times since 2004. Bear Stearns sees the funds rate rising to 5% by the May 10 Federal Open Market Committee meeting and an increasing risk of a 5.25% fed fund rate by the middle of the year.

"Bernanke's formal testimony leaves the door open for some further data-dependent interest rate increases," says John Ryding, an analyst at Bear Stearns.

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