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Bernanke Says Record High in Portuguese Bonds a Sign of Improved Growth Expectation

February 09, 2011 – Comments (0) | RELATED TICKERS: IN , FLT , N

From the written text of Bernanke's initial comment today: "Yields on 5- to 10-year Treasury securities initially declined markedly as markets priced in prospective Fed purchases; these yields subsequently rose, however, as investors became more optimistic about economic growth and as traders scaled back their expectations of future securities purchases."

This could be true but there are other reasons why bond yields increase or, in this case, skyrocket. I don't think Portuguese bonds hit record highs today because of high growth expectations.

And the argument about the market anticipating the end of the bond purchases? It just doesn't seem credible. Here's the thought experiment: The Fed announces tomorrow that it will start QE III in July and purchase another $600 billion off the long end of the yield curve. Do interest rates take a nose dive? I don't think they would.