Bonds Fall on Bernanke-Fueled Stocks Rally

U.S. Treasurys tumbled Friday as investors poured money into stocks after Federal Reserve Chairman Ben Bernanke bolstered rate cut hopes.

Bernanke said on Thursday a resurgence in financial strains in recent weeks had dimmed the outlook for the U.S. economy, signaling an openness to ease monetary policy again. (To read more about Bernanke's comments, click here.)

A benign reading Friday in the Fed's favored inflationmeasure did nothing to hurt the renewed rate-cut hopes. Stocks were again the beneficiary, while investors continued to unwind recent safe-haven flows that had boosted bonds.

"A big portion of the rally we've seen over the past two to three months is simply on equity weakness and the flight-to-quality bid," said Carley Garner, senior analyst at Alaron Trading in Las Vegas.

"The market is going to have to peel some of that bid out of Treasurys as the stock market recovers."

Bonds managed to find a floor after unexpectedly weak data on construction spending, while month-end buying also brought back a few bidders, but only after long bonds had fallen nearly two full points on the day at one point.

Benchmark 10-year notes were last down 15/32 in price, yielding 3.99 percent. The 30-year long bond was last trading down one full point to yield 4.39 percent.