Treasuries Maintain Gains Before Bernanke Policy Speech

Treasuries held gains after rising last week on speculation Federal Reserve Chairman Ben S. Bernanke will use his speech in Jackson Hole, Wyoming, on Aug. 31 to outline the case for further central bank action to support the economy.

Bernanke said the Fed has the ability to take steps to boost the expansion, in a letter last week. The central bank has already conducted two rounds of bond purchases to pump cash into the banking system under the policy of quantitative easing, programs known as QE1 and QE2. The U.S. is scheduled to sell $99 billion of notes over three days starting tomorrow.

“There’s a greater possibility of QE3,” following Bernanke’s comments, said Kei Katayama, who buys U.S. government debt in Tokyo for Daiwa SB Investments Ltd., which manages the equivalent of $63.1 billion. Daiwa SB is betting Treasury rates will rise as the economy improves, he said.

Benchmark 10-year yields were little changed at 1.69 percent as of 10:10 a.m. in Tokyo, according to Bloomberg Bond Trader data. The price of the 1.625 percent security due in August 2022 was 99 13/32.

The rate declined 12 basis points, or 0.12 percentage point, last week. It compares with the record low of 1.38 percent set July 25.

Further Action

“There is scope for further action by the Federal Reserve to ease financial conditions and strengthen the recovery,” Bernanke said in a letter dated Aug. 22 to California Republican Darrell Issa, the chairman of the House Oversight and Government Reform Committee.

Bernanke repeated the statement from the Federal Open Market Committee’s Aug. 1 meeting that the Fed will provide “additional accommodation as needed.” He has an opportunity to expand on his views in his speech at the end of the week at the Kansas City Fed’s annual economic symposium in Jackson Hole.

Trading of Treasuries is scheduled to close at 3 p.m. Tokyo time and stay shut during London market hours in observance of the U.K. Summer Bank Holiday, according to the New York-based Securities Industry and Financial Markets Association. Trading in New York will take place as usual, the schedule shows.