US bonds supported by strong oil, ECB

TOKYO: Treasuries were steady in Asia on Tuesday, supported by concerns about rising oil prices on global demand and wariness ahead of the European Central Bank's planned mid-week offering of low-cost liquidity.

While oil futures prices were off recent highs, they remained at historically high levels on continuing concerns about tension between Iran and the West.

Investors also awaited the European Central Bank's second three-year auction on Wednesday under its long-term refinancing operation, or LTRO, with a poll showing 30 euro money market traders expecting the ECB to allot 500 billion euros.

"The question is, if demand for funds at the LTRO is greater than expected, will this signal risk on or risk off? Some investors are waiting until after Wednesday to see how the markets assesses the outcome," a strategist at a Japanese brokerage said.

Also on Wednesday, Federal Reserve Chairman Ben Bernanke will appear before policymakers, and market participants will be waiting for signals about the central bank's pledge to keep rates low and provide additional stimulus.

The yield on the 10-year note edged up to 1.93 percent from 1.92 percent in late US trade, but was still below 1.97 percent in Asia on Monday. The benchmark yield has been wedged in a range between 1.79 percent and 2.17 percent since early November.

The yield on 30-year Treasuries was flat from US trading at 3.05 percent, down from 3.08 percent in Asia on Monday.

Federal Reserve purchases of seven-, 10- and 30-year securities on Monday, Tuesday and Wednesday also supported Treasuries.

On Monday, the Fed bought $4.96 billion of Treasuries maturing between May 2018 and February 2020.

The Treasury also sold three- and six-month bills at yields of 0.115 percent and 0.145 percent, respectively.

Bids on the three-month bills eclipsed those accepted by a 4.24 ratio, while bids on the six-month bills overwhelmed those accepted by a 4.32 ratio.

No coupon auctions are scheduled this week.