Bonds Surge As Bernanke Warns Of Bank Failures

[Purveyor]

NEW YORK, Feb 28 (Reuters) - U.S. government bonds rallied sharply on Thursday after jobless data hinted at recession and Fed chief Ben Bernanke offered glum testimony in which he predicted the credit crisis will end in bankruptcy for some banks.

Revisions to fourth-quarter economic growth showed the Federal Reserve chairman had plenty of reason to be pessimistic, with gross domestic product eking out a meager 0.6 percent increase.

But Bernanke's comments on banks sent stocks sharply lower, adding further impetus to bonds. He did say the banking sector as a whole was solid, yet warned some smaller institutions might go under.

In an environment of growing mistrust about which banks are best positioned to weather the crisis, his statement struck a nerve, sending benchmark 10-year notes up 1-13/32 in price for a yield of 3.68 percent.

Yields were down 18 basis points, the biggest one-day decline since December. "People seemed to focus on Bernanke's line that while large banks are well capitalized, some of the smaller banks may fail," said Andrew Brenner, a market analyst at MF Global. Jobless claims figures were hard to ignore too.

---EOE---

http://www.reuters.com/article/bondsNews/idUSN2862235720080228

[Win]

1. Ben is the fall guy.

And he knows it.

[whatchamacallit]

2. Someone needs to do a photoshop of Bernanke as captain of the Titanic