LONDON: US Treasuries retreated in Europe on Wednesday as riskier assets advanced on hopes Greece will ultimately get new bailout funds after its conservative party leader said he would make a pledge on reforms demanded by the country's creditors.
Greek political leaders are under pressure to show they will implement the painful reforms after elections due later this year, a condition for euro zone leaders to sign off on a second bailout that will enable it to meet March debt repayments.
Leaders have also given Greece until Wednesday to specify how it will achieve 325 million euros in spending cuts before a conference call of finance ministers later in the day to discuss the rescue package.
Reassurances from China that it would keep investing in euro zone government debt also soothed worries over the bloc's crisis, hurting demand for safe-haven Treasuries. But lingering uncertainty over Greece is expected to keep benchmark T-note yields below the 2 percent it has held below since mid-December.
The 10-year T-note yield was last at 1.945 percent up from 1.92 in late US trade on Tuesday. T-note futures were down 5.32 at 131-12/32.
"China's comments as well as the comments out of Greece has put some pressure on US Treasuries...but there's nothing that's telling me that the market is going to trade weaker here," a trader said.
"I'd have thought we'd have seen the market move a little bit wider but with no conclusion on Greece the market continues to have underlying support," he added.
Also on Wednesday, the US Federal Reserve will release the minutes of a Jan. 24-25 meeting at which it pledged to keep interest rates low through 2014 and provide additional stimulus for the economy as needed.
The minutes are expected to show a number of top officials saw a need for additional monetary easing when they met last month, though there are few signals the central bank will move soon.
"(Ten-year yields) have been roughly between 2.40 and 1.70 since August 2011, and we're right in the middle of that now. But demand is there at the worst levels."
"We're kind of stuck in the middle. The short-term picture seems a bit better, but the headwinds still seem to be there," another trader at a European brokerage in Tokyo said.
The yield on 30-year T-bonds rose to 3.09 percent from 3.07 percent in US trading.
The Federal Reserve bought $4.95 billion in debt maturing between 2020 and 2021 out of $14.98 billion submitted as part of its Operation Twist programme, which is designed to lower long-term borrowing rates. The central bank will make additional purchases of as much as $7 billion on Thursday and Friday.
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