Government bonds charge higher after Bernanke interview

The prospect of the Federal Reserve expanding its bond-buying program gave Treasurys a lift Monday. Fed Chairman Ben Bernanke said the bank could boost the $600 billion effort if the economy needs it.

In a taped interview with CBS' "60 Minutes" that aired Sunday night, Bernanke said the economic recovery is barely "self-sustaining." He defended the Fed's $600 billion plan, which was launched last month and aimed at lowering long-term interest rates.

The 10-year note rose 59.3 cents Monday. That pushed the yield down to 2.93 percent from 3.00 percent late Friday.

Bernanke said another recession was unlikely but he also warned that persistently high unemployment remains a threat. The government reported Friday that the unemployment rate rose to 9.8 percent in November, a seven-month high. Bernanke said it could take four or five more years to cut that rate in half.

A common criticism of the Fed's program, voiced by Republicans in Congress and many investors, is that it risks creating out-of-control inflation. Bernanke responded to the charge, saying he had "100 percent confidence" the Fed could move quickly enough to prevent that from happening.

"We could raise interest rates in 15 minutes if we have to," Bernanke said. "So, there really is no problem with raising rates, tightening monetary policy, slowing the economy, reducing inflation, at the appropriate time. That time is not now."

In other trading Monday, the 30-year bond rose $1.25. The higher price nudged the 30-year yield to 4.24 percent from 4.31 percent late Friday. The two-year yield also inched lower, to 0.43 percent from 0.47 percent.

Treasurys may lose ground in the coming days as the government adds more supply to the market. The Treasury will auction $66 billion in new bonds this week, starting Tuesday with the sale of $32 billion in three-year notes.

In Treasury bill trading, the three-month T-bill paid a 0.13 percent yield. Its discount was 0.14 percent.