Fall as stocks rise on US stimulus hopes

In his speech in Jackson Hole, Wyoming on Friday, Bernanke did not announce new easing measures but said the Fed would extend its policy meeting next month to two days (Sept. 20-21) to consider its options.

Analysts said the Fed's September meeting may take steps such as extending the duration of bond holdings or adopting measures to help ease dollar funding strains while leaving the decision on whether to start a new bond purchase program for later.

At 1002 GMT, T-note futures were 6/32 down on the day at 130-02/32. Trading was thin due to a bank holiday in London.

Rabobank strategist Philip Marey said the Fed would only move to buy more bonds if upcoming data unveils a clear recession risk and sees Treasuries rangebound in the near term.

"Even if (the Fed) does something in September (the market impact) would still be rather limited," Marey said. "Overall it would still mean that yields are determined by the economic data coming in and the crisis in the euro zone."

"Unless you really start something in terms of QE3 that would help risk perception improve a lot ... the economic picture is still overwhelming," Marey added.

Tomohisa Fujiki, interest rate strategist for BNP Paribas Securities in Tokyo, said the bank's house view is for the Fed to launch a fresh asset-buying programme in November. Until then, he sees markets in a wait-and-see mode due to an uncertain economic outlook in the US.

"Equities still haven't returned to levels seen before the recent sell-off, and bonds are still hovering near their recent highs. It seems investors are taking a wait-and-see stance amid an uncertain outlook," Fujiki said.

Copyright Reuters, 2011