Federal Reserve Chairman Ben Bernanke eased tensions stating that key interest rates will remain low in the future, until the economy shows more signs that it is getting better. The good news spurred a rally in treasury prices.
Although the economy seems to be improving, Bernanke reassured the House Financial Committee that the federal funds rate will probably stay at almost zero. The current rate is at 0% to 0.25%.
"Clearly, Treasury investors are focusing on the fact that short rates are going to be low for an extended period," said the head of U.S. government bond strategy, William O'Donnell.
Bernanke's assessment of the economy was better than expected, however, he says the financial system remains stressed, while unemployment continues to rise. Already at a 26-year high, unemployment is expected to rise even more in the near future. Initially, experts had predicted that unemployment would go above ten percent and, as of now, those predictions remain unchanged.
Bernanke also stated that, at some point, the Fed will begin withdrawing their enormous amount of stimulus that it has been feeding the economy, but says the time is not now.
