US bond prices firm as Greece fears rise

TOKYO: Treasury prices firmed in Asia on Tuesday, with benchmark yields wallowing around their lowest levels since October, as fears over the future of Greece's austerity steps and continued participation in the euro zone prompted investors to seek the safety of government debt.

Greek party leaders will gather on Tuesday to hear the proposal of President Karolos Papoulias. If a compromise can't be reached, the country will face another election at which the anti-austerity leftists are likely to emerge victorious.

Without the austerity steps, Greece can't meet conditions for the bailout funds needed to remain in the euro zone.

"This is not a time to be short. This is a time to buy Treasuries, Japanese government bonds and German bunds," said a bond trader at a European brokerage in Tokyo.

"Yields are low everywhere, but for where we are right now, they are appropriate," he added.

Some investors say Tuesday's report on April US consumer prices could further pressure yields if the headline figure is negative, giving the US Federal Reserve more leeway to embark on a third round of quantitative easing to support the economy as it braces for the impact of the unfolding European turmoil.

Economists polled by Reuters expect the headline CPI to be flat, and to show a rise of 0.2 percent when food and energy items are excluded.

The yield on 10-year Treasuries dropped to 1.76 percent from 1.78 percent in late US trade and from 1.82 percent in Asian trading on Monday.

The 30-year bond yield fell to 2.92 percent from 2.94 percent in late US trading, and from 3.0 percent in Asia on Monday.