Treasuries rise third day on Cyprus concern, Fed begins meeting

Fed Meeting

The Fed will issue a statement and economic projections after concluding its two-day policy meeting tomorrow, and Bernanke will brief reporters.

“Premature rate increases would carry a high risk of short-circuiting the recovery, possibly leading -- ironically enough -- to an even longer period of low long-term rates,” Bernanke said in a speech in San Francisco on March 1.

The central bank has held its benchmark overnight target rate for loans between banks at zero to 0.25% since 2008. The central bank is buying $85 billion a month of Treasury and mortgage debt to cap borrowing costs.

“Bernanke is leading the charge and continues to water down any hawkish talk,” said Barra Sheridan, a rates trader at Bank of Montreal in London. “U.S. data has been uniformly strong, but the risk looking forward is that it takes a downturn. If that’s the case, yields could dip toward 1.80%.”

Fed Purchase

The Fed is scheduled to purchase as much as $3.5 billion of Treasuries today maturing from May 2020 to February 2023 as part of the stimulus program, according to the website of the Fed Bank of New York.

Builders broke ground on 917,000 homes at an annual rate, up 0.8% from a revised 910,000 pace in January that was higher than initially estimated, the Commerce Department reported today in Washington. Building permits, a proxy for future construction, advanced 4.6% to 946,000, the strongest since June 2008.

Cyprus’s Defense Minister Fotis Fotiou said the government was working on different scenarios to raise the 5.8 billion euros ($7.5 billion) that regional finance ministers set as condition for bailout amid concern the region’s sovereign-debt crisis will worsen.

The Cypriot parliament may begin discussion of legislation though it is uncertain whether a vote will be held today, Fotiou said in comments to Greek Skai TV.

Cyprus is the fifth euro country to seek a bailout since 2010. The proposed levy on depositors sparked outrage in the island nation and concern among investors about setting a precedent by breaking the taboo against raiding bank accounts.

Bloomberg News

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