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Fed chief acknowledges credit fears
By Krishna Guha in Washington and Richard Beales, Michael MacKenzie and Saskia Scholtes in New York
Published: July 18 2007 18:47 * Last updated: July 19 2007 01:34
Ben Bernanke acknowledged for the first time on Wednesday that credit concerns were spreading beyond the subprime mortgage market as investors showed their worries with a flight to quality, seeking refuge in government bonds and other safe assets.
Although the Federal Reserve chairman played down the likely effect on the US economy, declaring that financial conditions remained “generally favourable”, US Treasury yields fell sharply following the release of his testimony to Congress. Ten-year notes were yielding 5.02 per cent – 2 basis points down on the day – after dipping below 5 per cent.
Mr Bernanke said the Fed had trimmed its central tendency forecasts for growth this year and next, but made no change to its forecasts for inflation.
Investors were already shaken by news that two Bear Stearns-managed hedge funds that had invested in subprime loans were nearly worthless. Weak earnings reports added to the day’s gloom. On Wall Street, the S&P 500 index closed down 0.2 per cent, following a day of losses across most of Asia and Europe.
http://www.ft.com/cms/s/029bce2c-3554-11dc-bb16-0000779fd2ac.html
By Krishna Guha in Washington and Richard Beales, Michael MacKenzie and Saskia Scholtes in New York
Published: July 18 2007 18:47 * Last updated: July 19 2007 01:34
Ben Bernanke acknowledged for the first time on Wednesday that credit concerns were spreading beyond the subprime mortgage market as investors showed their worries with a flight to quality, seeking refuge in government bonds and other safe assets.
Although the Federal Reserve chairman played down the likely effect on the US economy, declaring that financial conditions remained “generally favourable”, US Treasury yields fell sharply following the release of his testimony to Congress. Ten-year notes were yielding 5.02 per cent – 2 basis points down on the day – after dipping below 5 per cent.
Mr Bernanke said the Fed had trimmed its central tendency forecasts for growth this year and next, but made no change to its forecasts for inflation.
Investors were already shaken by news that two Bear Stearns-managed hedge funds that had invested in subprime loans were nearly worthless. Weak earnings reports added to the day’s gloom. On Wall Street, the S&P 500 index closed down 0.2 per cent, following a day of losses across most of Asia and Europe.
http://www.ft.com/cms/s/029bce2c-3554-11dc-bb16-0000779fd2ac.html
