NEW YORK: US Treasuries were steady on Thursday before Federal Reserve Chairman Ben Bernanke was due to give testimony before Congress for a second day, with investors focused on whether he will give any new clues over when the US central bank will begin reducing its bond purchases.
Ten-year yields fell to their lowest levels in two weeks after Bernanke told a House of Representatives panel on Wednesday that the Fed's plans to scale back its bond purchases later this year are not set in stone, and still dependent on the strength of the economy.
The Senate will now have the opportunity to grill Bernanke over his monetary policy, after members of the House panel asked few questions specific to the Fed's bond purchase program.
"We'll have to see if any questions are specifically targeted towards tapering and the exit strategy of the Fed towards the latest QE," said Jason Rogan, managing director in Treasuries trading at Guggenheim Partners in New York.
Benchmark 10-year notes were last down 2/32 in price to yield 2.50 percent.
Treasuries have stabilized after a dramatic selloff that sent 10-year note yields to two-year highs of 2.76 percent on July 8. They jumped by more than a full percentage point from around 1.60 at the beginning of May.
"There has been a process of normalization to the market in the last couple of weeks after that capitulation trade," Rogan said.
A number of top Fed officials stressed in speeches after the selloff that the Fed will pull back its purchases slowly and will keep rates anchored at record low levels for a long time to come, in an effort to soothe investors and reduce market volatility.
"I think the markets are beginning to understand our message," Bernanke said on Wednesday.
Demand for inflation-linked bonds will be tested later on Thursday when the Treasury auctions $15 billion in 10-year Treasury Inflation-Protected Securities (TIPS).
TIPS have stabilized after being one of the worst performers in the recent selloff. Investors had paid a premium to buy TIPS on the expectation that Fed bond purchases would spur higher inflation, but that hasn't yet happened and inflation is instead running well below the Fed's 2 percent target.
Consumer price data on Tuesday showed that prices were stabilizing, easing some fears that inflation would continue to fall. The Consumer Price Index (CPI) increased 0.5 percent in June, the largest increase since February, after nudging up 0.1 percent in May, though gasoline prices accounted for about two thirds of that.
Treasuries had little reaction to data on Thursday that the number of Americans filing new claims for jobless benefits dropped more than expected last week to its lowest level in four months.
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