NEW YORK: US Treasuries prices were little changed on Wednesday with prices retracing earlier losses even as traders reduced their government debt holdings ahead of a $24 billion auction of 10-year notes.
Traders were worried about the demand for the 10-year note, a day after relatively tame bidding for $32 billion worth of three-year notes.
Hopes Greek leaders would reach a fiscal reform deal in exchange for a bailout to avoid a disorderly debt default also stoked selling in Treasuries, but lingering worries about the future of the euro zone have kept longer-dated Treasury yields from their recent highs set in late 2011, analysts said.
"There are some positionings going into the rest of the refunding so that's weighing on the market," said John Canavan, market strategist at Stone & McCarthy Research Associates in Princeton, New Jersey.
Benchmark 10-year note yield crossed above the 2 percent threshold for the first time in two weeks. It has risen since Friday in the wake of a stronger-than-expected January payrolls report and cautious optimism about Greece securing 130 billion euro ($172 billion) in fresh aid from the International Monetary Fund and the European Union.
Leaders of the three parties in the coalition of Greek Prime Minister Lucas Papademos are attempting again to reach a fiscal reform deal after Papademos postponed a meeting on the matter on Tuesday.
"The situation in Greece is particularly fluid. I would hope most people are taking what they have said about a deal with a large grain of salt until a deal is signed, sealed and delivered," Canavan said.
The benchmark 10-year note was flat at 100-6/32, yielding 1.98 percent. The 10-year yield touched 2.005 percent in overseas trading.
The 30-year bond was unchanged on the day at 99-17/32 with a yield of 3.15 percent. It was down half a point and hit a session high at 3.18 percent.
With one eye on the developments in Greece, traders were gearing up for the second leg of this week's $72 billion quarterly refunding. They expect the new 10-year issue to sell at 2.042 percent, above the record low of 1.900 percent at last month's 10-year auction.
At this level, the 10-year note should entice interest from domestic and overseas investors, analysts said.
The Treasury will announce the 10-year auction results shortly after 1 p.m. (1800 GMT).
While the Treasury continues its February refunding, the Federal Reserve will hold two operations for its $400 billion Operation Twist program aimed at holding down long-term interest rates. At 11 a.m. (1600 GMT) It plans to buy $1.5 billion to $2.0 billion in Treasuries due in 2036 to 2041, followed by a $8.00 billion to $8.75 billion sale of Treasuries due in 2013 at 2 p.m. (1900 GMT).
In the absence of major economic data, traders may look for clues on what the Fed policy-makers are thinking when San Francisco Fed President John Williams is scheduled to speak about the economy at 10:50 a.m. (1550 GMT).
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