Bernanke Market Signals No Shift With Obama Deficit Cutting

The Federal Reserve can be counted on to keep its balance sheet big and interest rates low if President Barack Obama and Republican lawmakers agree on a multi-year deal to slash the $1.4 trillion budget deficit.

That’s the message from the Treasury bond market, where yields on 10-year securities sank to their lowest level in almost a month this week on speculation that government budget cuts will slow the economy and encourage the Fed to hold off from raising borrowing costs, said Mohamed El-Erian, chief executive officer of Pacific Investment Management Co.