Interest rates mixed as Bernanke testimony to Congress, housing data, 5-year notes sale

Rates mixed after Bernanke talks to Congress

CHARLOTTE, N.C. — Interest rates moved in a narrow range in the bond market Wednesday after Federal Reserve Chairman Ben Bernanke said rates will remain low to help support the economy.

A drop in new home sales and lower demand for the Treasury’s auction of five-year notes offset the beneficial effects that Bernanke’s comments had on bond trading.

Bernanke had good news for bond investors during his regular semi-annual report to Congress on the economy. The Fed chairman said he still expects interest rates will remain low for an extended period. Because rates and bond prices move in opposite directions, low rates are a positive sign for investors.

The Fed surprised investors last week by hiking rates it charges banks for emergency loans. The market was concerned then that the move was the start of a trend toward higher rates overall.

The yield on the 10-year Treasury note maturing in February 2020, which is a basis for rates on mortgages and other consumer loans, edged up to 3.70 percent in late trading Wednesday from 3.69 percent late Tuesday. Its price fell 5/32 to 99 10/32. Yield and price move in opposite directions.

The Commerce Department said sales of new homes fell to a record low in January. Economists had been expecting an increase. The government said that new home sales fell 11.2 percent last month to a seasonally adjusted annual sales rate of 309,000 units. That’s the lowest level on a record that goes back nearly 50 years.

Housing has been a big concern for investors who this week have been worrying about consumer spending. Many have been selling stocks and other investments seen as risky in a weak economy and transferred their money to Treasurys.

Demand at a Treasury Department sale of $42 billion in five-year notes weakened.

The bid-to-cover ratio, a measure of demand, came in 2.75, lower than the 2.80 in an auction for notes with a similar maturity in January.

The yield on the five-year note that matures in January 2015 rose to 2.36 percent from 2.35 percent.

The five-year Treasury auction is the third of this week’s $126 billion government note and bond sales. An auction for $32 billion of seven-year notes is Thursday.

In other trading, the yield on the 30-year bond that matures in February 2040 rose to 4.65 percent from 4.63 percent. The price fell 6/32 to 99 21/32.

The yield on the two-year note that matures in February 2012 stood at 0.88 percent.

The yield on the three-month T-bill that matures May 27 was unchanged at 0.11 percent. Its discount rate stood at 0.12 percent.