TOKYO: The yield on 10-year US Treasuries slipped further below 2 percent on Wednesday as investors remained wary ahead of Spanish and Italian debt auctions later this week, which offset growing optimism about the US economy.
The 10-year Treasury yield last stood at 1.96 percent , down from 1.98 percent in late US trade on Tuesday, when buyers emerged whenever yields touched the 2 percent mark.
"Despite recent good US data, there's still no move to get on board the risk assets. That will come, but maybe not today," said a market participant at a European bank in Tokyo.
Recently strong US data, including the nonfarm payroll report last week, whetted investors' risk appetite but also highlighted the divergent expectations for the U.S and the euro zone economies. Fears about the latter have kept safe-haven demand steady, particularly as European funding fears remain a concern.
Spain will launch a new three-year bond alongside sales of two existing bonds on Thursday while Italy on Friday is also expected to announce an auction of bonds maturing in 2015 and may add other lines.
Thirty-year Treasury yields slipped to 3.02 percent from 3.04 percent in late North American trade.
Later Wednesday, the Treasury will sell $21 billion in 10-year notes, and the US Federal Reserve will make its first purchase at the long end of the market since Dec. 20. The Treasury auctions 30-year notes on Thursday, and will reopen a previous 30-year bond by $13 billion.
On Tuesday, the Treasury's $32 billion sale of three-year notes yielding less than 0.4 percent drew strong demand, with a very strong 3.73 ratio of bids offered to those accepted.
Bonds also got some US support from dealers buying Treasuries as they exited rate hedges on corporate bond deals. Companies are expected to sell $20 billion to $25 billion in corporate debt this week, with $7.35 billion already sold on Monday, according to IFR, a unit of Thomson Reuters.
A poll by Nomura Research showed a slight bearish skew to expectations for 10-year Treasury yields by the end of 2012, with the 2.0-2.5 percent range the most popular. The average response was 2.21 percent and the median response was 2.25 percent.
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