Bernanke Sets Bearish Tone for Bonds
This Wednesday, Federal Reserve Chairman Ben Bernanke offered a more detailed breakdown of his "exit strategy" for the current economic recovery policies.
Though it's not yet time to dismantle the emergency support system, it's important for the Fed to have a plan in place… and for everyone else to prepare for when that plan inevitably goes into action.
Of course, planning for the future is not what American investors have been doing best lately, and they tend to overreact to the mere mention of any minor fluctuations in the market.
Bernanke announced he plans for a "modest increase" sometime in the near future to help close the gap between the current discount rate and federal funds rate.
Though he stressed this was a normalizing tactic, the market rather predictably overreacted to the comments, forcing a drop in the value of Treasuries as many investors took higher yields than expected.