Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co.; Jim Rogers, chairman of Rogers Holdings; Wells Capital Management Inc. and Goldman Sachs Group Inc. all have voiced concern about long-term bonds.

The Jan. 3 release of the minutes from the FOMC’s Dec. 11-12 meeting illustrates investors’ sensitivity, Cohen said. Central bankers discussed possibly curtailing or halting their asset purchases this year. That surprised analysts and traders, sending the Standard & Poor’s 500 Index down 0.2 percent and pushing up yields on the benchmark 10-year Treasury note 0.07 percentage point that day.

James Bullard, president of the Federal Reserve Bank of St. Louis, says the “communication challenge” the central bank faces with the end of QE3 is comparable to all periods of easing.

“The same thing happens with interest-rate policy; you’re lowering the interest rate, and after a while you decide to quit lowering the interest rate and just hold it steady,” Bullard said in a Feb. 1 interview in Washington. “And at that point, you have to convince markets this is really a lower rate than it used to be.”

Treasury Yields

U.S. 10-year government notes declined, pushing the yield up two basis points, or 0.02 percentage point, to 1.97 percent at 10:32 a.m. London time. Yields on thirty-year bonds also climbed two basis points to 3.18 percent.

Fed Governor Jeremy Stein warned last week that the market for speculative-grade debt may be overheating even as his institution’s policy of keeping benchmark borrowing costs low is pushing investors into riskier debt.

“We are seeing a fairly significant pattern of reaching- for-yield behavior emerging in corporate credit,” Stein said in a Feb. 7 speech in St. Louis. If the observation is accurate, he said, “it does not bode well for the expected returns to junk bond and leveraged-loan investors.”

Just because the Fed halts its asset purchases also doesn’t mean it couldn’t restart them. Bernanke announced his first quantitative-easing program in November 2008; it ran until March 2010, and QE2 lasted from November 2010 to June 2011.

Bullard’s View