Bonds gain on Greece debt worries

TOKYO: US Treasuries edged up in Asia on Wednesday, supported by persistent concerns over a possible default from Athens ahead of a conference call by the leaders of Germany, France and Greece.

Ten-year notes rose 6.5/32 in price for a yield of 1.965 percent, compared to 1.992 percent in late US trading.

Asian stocks and US stock futures fell as investors worry whether euro zone policy makers have a coherent plan to support Greece, or whether they may let the country default.

"It's very difficult to maintain short positions ahead of the European open," said a trader at a European brokerage.

Expectations that the Federal Reserve will introduce new easing measures next week are also seen keeping the 10-year yield below 2 percent in the near future.

"The current yield level reflects investor fears over the economy. I can't see anything that could boost the economy at the moment," said a director of foreign bond trading at a Japanese brokerage.

Still, Wednesday's $13 billion auction of US 30-year bonds faces possible investor fatigue after a recent rally in the market.

This week's final coupon-bearing auction comes after two mediocre ones, suggesting that investors are in no hurry to scoop up new supply at these historically low yields.

Expectations that the Federal Reserve would not target the longest US government debt maturity in any new stimulus programme to help the economy also reduce the allure of the 30-year issue, traders said.

In the "when-issued" market, traders expect the reopening of the 30-year bond , which was originally sold in August, to sell at a yield of 3.31 percent.

Copyright Reuters, 2011