NEW YORK: US government securities prices rose on Tuesday in advance of Federal Reserve Chairman Ben Bernanke's news conference on Wednesday at which he is expected to express support for the extension of easy monetary policy to help the economy.
Solid demand for $35 billion of new two-year debt also buttressed the bond market, with yields hovering at their lowest level in about a month. For more on the two-year auction.
Offering the market overall support was the view that even as the Fed approaches the end of its second phase of bond buying (QE2), it will hold on to its portfolio -- and thus its current level of monetary accommodation -- for some time.
"(The Fed will) focus on flexibility," said Constance Hunter, chief economist at Aladdin Capital Holdings in Stamford, Connecticut. "There will probably not be a QE3, but they will probably not withdraw QE2 either. They are going to leave their balance sheet at this level for some time."
The Fed will end a two-day policy meeting with a statement at 12:30 p.m. (1630 GMT) on Wednesday and a news conference by Fed Chairman Ben Bernanke at 2:15 p.m. (1815 GMT).
The Fed's purchase of $1.999 billion in Treasuries with maturities ranging from May 15, 2021 to November 15, 2027 earlier on Tuesday aided long-dated bonds which outperformed the rest of the curve.
The purchases were part of the central bank's second phase of so-called quantitative easing, known as QE2, a $600 billion program of Treasuries purchases by the Fed intended to spur economic growth and set for completion at midyear.
Benchmark 10-year notes rose 9/32 in price with their yields easing to 3.34 percent from 3.37 percent on Monday. Thirty-year Treasury bonds rose 25/32, yielding 4.41 percent, down from 4.46 percent on Monday.
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