At the precise moment that Fed Chairman Ben Bernanke's speech was released today, treasuries, which had already risen dramatically today, rocketed still higher and at an accelerated pace. The green arrow on this chart represents the moment that Mr. Bernanke began his speech. This reaction was almost certainly due to Mr. Bernanke's comment that the Fed may lower interest rates even more at the next FOMC meeting mid-December, and that the Fed will continue to buy treasuries, probably at an accelerated pace. The Fed funds rate is at only 1% now, so the Fed can't lower rates too much more. JP Morgan has predicted that the Fed will cut rates to 0% in January '09. Fed Fund futures traders seem to agree.
As a policy, at the moment that a Fed governor is scheduled to begin a speech, the Fed will post the text of that speech to the Fed's website. Thus, all the financial markets receive the text of the speech at the same moment in time, and the markets often react immediately to the remarks being made, even though it may take several minutes for the speaker to deliver their comments.
There is only one thing that I can't figure out: How do people read through those speeches and react so quickly? :) The market response usually occurs within seconds of the speech being released. I'm a good reader, but even I'm not that fast!
