SINGAPORE: US 10-year Treasuries edged lower in Asia on Wednesday but their losses were limited, with ongoing concerns over the euro zone's debt crisis seen likely to lend support to safe haven US debt.
Ten-year Treasuries gave back a bit of their gains from the previous day, when they rallied after a strongly bid 10-year note auction. The rally in Treasuries on Tuesday intensified as US stocks fell after the Federal Reserve kept its monetary policy unchanged.
Ten-year notes dipped 5/32 in price to yield around 1.981 percent, up a bit from late US trade on Tuesday but still near the lower end of this month's range of roughly between 2.17 percent to 1.95 percent.
After a sale of $21 billion in reopened 10-year notes on Tuesday attracted strong demand, focus now turns to a $13 billion auction of reopened 30-year bonds on Wednesday.
Investor risk appetite may continue to be constrained by worries about the euro zone's debt crisis and market players now seem reluctant to take an outright short position in Treasuries, said a trader for a US brokerage house in Tokyo.
"I think we stay risk-off," the trader said. One option for market players looking for an opposite move, toward an improvement in risk appetite, may be to bet on a widening in the 10-year/30-year yield spread, especially going into Wednesday's 30-year bond auction, he said.
"I myself think the 10s/30s steepener is a decent risk/reward...but I don't want to be outright short the market," the trader said.
One focal point for the market is a forthcoming decision by Standard & Poor's on euro zone sovereign ratings. S&P warned earlier in December of a possible downgrade of 15 euro zone countries shortly after last week's European Union summit, and has yet to announce its decision.
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