Treasuries – 10yr TSYs sold off this week for the first time since the week ended 7/23

Treasuries – 10yr TSYs sold off this week for the first time since the week ended 7/23; more
than 100% of the sell-off came on Fri in the wake of Bernanke’s address. 10yr yields surged
18bp (!) on back of the Bernanke text (you have to go back to May to find a sell-off in the
same league as on Fri). The Fed chief was more sanguine than current market fears (both on
growth and deflation) and also was a bit more hawkish than some hoped (there was a small
expectation that new policy initiatives would be annnounced on Fri). The long-Treasuries
trade had become a pretty crowded one and the desk noted real selling on Fri. The 2-10
spread collapsed all the way to 195bp on Thurs before snapping back to ~210bp by Fri
afternoon. Inflation expectations have dropped meaningfully (from ~240bp back in May
down to ~150bp before bouncing back to 163bp on Fri – this is the 10yr TIPS spread).