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Friday, August 22, 2008

Economic News Bernanke, oil and treasury

Treasuries declined after Federal Reserve Chairman Ben S. Bernanke suggested that the central bank is relying on slowing growth and a strengthening dollar to contain inflation. The decline pushed yields on two-year notes up the most in a month. Government debt had slumped earlier after the Korea Development Bank said it's ``considering'' an investment in Lehman Brothers Holdings Inc., easing concern about the fallout from credit market losses.

Bernanke called dollar stability and price declines in oil and other commodities ``encouraging.'' Still, the inflation outlook remains ``highly uncertain'' and the Fed ``is committed to achieving medium-term price stability and will act as necessary to obtain that objective,'' he said at the Fed Bank of Kansas City's annual symposium in Jackson Hole, Wyoming.

Treasury notes also declined as gains in European and U.S. stocks tempered demand for the safest of assets. The Standard & Poor's 500 Index rose 0.9 percent, while the Dow Jones Stoxx 600 Index rose 1.6 percent. Futures contracts on the Chicago Board of Trade show odds of 56 percent the Fed will raise its 2 percent target for overnight bank lending in January. A month ago, traders predicted a rate increase in December. Banks and securities companies have reported more than $500 billion of writedowns and credit-related losses linked to the collapse of the subprime mortgage market since the start of 2007.

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