May 22 (Bloomberg) -- Treasuries and gold tumbled while the dollar rallied as Federal Reserve Chairman Ben S. Bernanke told Congress the central bank may cut the pace of bond purchases at its next few meetings. U.S. equities erased early gains to trade little changed.
Ten-year Treasury yields jumped eight basis points to 2.01 percent at 1:54 p.m. in New York, topping 2 percent for the first time since March. The Dollar Index rose 0.5 percent to 84.25, near its strongest level since 2010. The Standard & Poor’s 500 Index was down 0.1 percent at 1,667.71 after climbing as much as 1.1 percent. Gold futures retreated 1.1 percent to $1,362.50 an ounce, after rising 2.6 percent earlier.
U.S. stocks extended gains earlier while gold and Treasuries rallied as Fed Chairman Ben S. Bernanke said in prepared remarks to Congress that a premature withdrawal of its bond buying would put the economic recovery at risk. Treasuries and gold turned lower as Bernanke later told lawmakers that as the outlook for the labor market "improves in a real and sustainable way, the committee will reduce the flow of purchases," without specifying a time.
"The 2 percent is the magic thing on 10 year yield," Frank Ingarra, head trader at Greenwich, Connecticut-based NorthCoast Asset Management LLC, said in a telephone interview. His firm oversees $1.6 billion. "It’s the threshold so going toward that, people are getting a little worried," he said. "People are just digesting more of Bernanke’s comments."
Bernanke is leading the most aggressive economic stimulus in the Fed’s 100-year history in an effort to spur growth and reduce an unemployment rate that stands at 7.5 percent almost four years into a recovery from the longest and deepest recession since the Great Depression.
U.S. policy makers will know in three to four months whether the economy is healthy enough to overcome federal budget cut and allow the central bank to begin reducing record stimulus, Fed Bank of New York President William C. Dudley said in an interview with Michael McKee airing today on Bloomberg Television.
--With assistance from Adam Haigh in Sydney, Claudia Carpenter, Paul Dobson, Andrew Rummer, Shelley Smith, Stephen Voss and Stephen Kirkland in London, David Yong in Singapore and Craig Torres in Washington. Editor: Michael P. Regan