Wednesday, 13 June 2012 10:57
TOKYO; Benchmark US Treasury bonds inched higher in Asia on Wednesday, underpinned by continued concern about the euro zone debt crisis even as investors braced for a 10-year note sale in the wake of a disappointing 3-year auction.
The Treasury will sell $21 billion in 10-year notes on Wednesday and $13 billion in 30-year bonds on Thursday, after a three-year note sale on Tuesday met lacklustre demand.
Some $32 billion of three-year notes sold at a high yield of 0.387 percent. They priced at 0.4 basis points above where they traded before the auction, which was the largest concession since February 2011.
Traders on Tuesday were pricing in expectations that the new 10-year notes would price at around 1.67 percent , which would be a record low auction yield.
Continuing worries about the euro zone debt crisis underpinned bonds ahead of Greek elections on June 17 that could determine whether the country remains in the euro zone.
Investors also remained cautious as they assessed the impact of a Spanish bank rescue.
"Bonds sold off yesterday after the weak three-year sale, but came back a but because Europe hasn't turned a corner yet. Depending on European developments, fear could offset supply/demand concerns," said a fixed-income fund manager at a Japanese asset management firm in Tokyo.
The Federal Reserve will purchase as much as $5.5 billion in notes due 2020-2022 as part of its "Operation Twist" stimulus program at 11am EST (1500 GMT), two hours before the auction, and some dealers could use the buyback to sell 10-year notes to make room for the sale.
The yield on 10-year notes edged down to 1.65 percent from 1.67 percent in late US trade, but were still well above 1.59 percent in Tokyo on Tuesday.
The yields on 30-year bonds slipped to 2.76 percent from 2.78 percent in late US trade, but were also above 2.71 percent in Tokyo on Tuesday.