US Bonds inch higher on Greece debt worries

TOKYO: US Treasuries edged up in Asia on Thursday, as initial relief over assurances from Germany and France about keeping Greece in the euro bloc wore off amid scepticism over whether policymakers can help Athens avoid default.

* Ten-year notes nudged up 1.5/32 in price to yield 1.988 percent , compared to 1.992 percent in late US trade.

* In a report prepared for ministers meeting in Poland on Friday and Saturday, senior EU officials said the 17-nation euro area faces a "risk of a vicious circle between sovereign debt, bank funding and negative growth".

* "Stocks are catching up with the relief rally on Wall Street, but bonds are being supported too as investors fret over a possible rating cut to Italy and a Greek default," said a trader at a European bank.

* Speculation is rife that Moody's might downgrade its rating on Italian debt soon as it is almost 90 days since the US agency said it could cut its Aa2 rating.

* Also attracting attention is Spain's debt auction later in the day. The country is expected to pay a heavy premium to borrow up to 4 billion euros via three bond issues after Italy had to pay the highest interest rates in the euro era to sell five-year debt on Tuesday.

* 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 US Treasury department will at 1500 GMT announce weekly 3-month and 6-month bill offerings, as well as sales of 52-week bills and 10-year inflation-protected securities.

* Expectations that the Federal Reserve will not target the longest US government debt maturity in any new stimulus programme to help the economy have reduced the allure of the 30-year issue, investors said.

* Federal Reserve Chairman Ben Bernanke will give brief opening remarks before a conference in Washington, D.C. at 1245 GMT.

Copyright Reuters, 2011