LONDON: US Treasury debt prices edged lower in Europe on Wednesday on expectations Greek political leaders would reach a deal to avoid an unruly default, fuelling risk appetite and reducing demand for safe-haven assets.
Market participants said the announcement of a Greek agreement would probably push 10-year yields on benchmark debt above the 2 percent level they hit earlier in the day.
The 10-year T-note yield was last at 1.99 percent, up 1 basis point from levels in late US trade on Tuesday, while the yield on 30-year T-bonds rose to 3.16 percent from 3.14 percent.
Any sell-off in Treasuries was likely to be short-lived because of uncertainties about Greece's future in the monetary union, even if a deal was reached, and concerns about the solvency of other euro zone countries, analysts said.
"Once the markets are not worried about Greece, then it's Portugal or Spain or Italy," said Philip Marey, strategist at Rabobank.
"Overall, while there is some support for Treasury yield levels from the US recovery, the major movements that we are seeing are still determined by the euro zone crisis," he added.
Greece missed another deadline to reach political consensus on Tuesday, and has until mid-February to agree a package with the euro zone, the European Central Bank and the International Monetary Fund.
"In the near term, it seems as though no one wants to be setting up ahead of potential risk of Greece defaulting," a London-based trader said.
Traders were also cautious before an auction of $24 billion of 10-year debt later on Wednesday after a sale of three-year notes met average-to-soft demand on Tuesday. The US Treasury will also offer $16 billion of 30-year bonds on Thursday.
T-note futures were down 4/32 at 131-01/32.
"People are going to be short heading into the auction. What we've seen is a back-up in yields and given that back-up, people are a little bit reticent to be adding 10-year duration and 30-year duration tomorrow to the portfolio," the trader said.
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