US bonds steady in Asia, with sales eyed

TOKYO: Treasury prices were steady in Asia on Tuesday, taking a breather from their recent rally that pushed benchmark yields to three-month lows as investors positioned for the first of this week's offering of $72 billion in coupon-bearing debt by the US Treasury.

The Treasury will sell $32 billion of three-year notes later on Tuesday, followed by $24 billion of 10-year notes on Wednesday and $16 billion of 30-year bonds on Thursday.

Continuing fears about the strength of the US economy and the European debt crisis are likely to keep investors' appetite for debt steady and support demand at this week's sales, traders said.      

"We've steepened up, and people are quite happy to grab yield, so I think the 30's will go all right, the 3's will go all right, anyway, they always do, and what will happen with the 10's is that we'll see concession there and then we'll rally out of it, and into the 30's," said a trader at a European brokerage in Tokyo.

The yield on 10-year Treasuries stood at 1.87 percent, steady from late US trade and above 1.83 percent in Asian trading on Monday. Yields fell as low as 1.82 percent on Monday, but resistance at 1.80 percent held.

The 30-year bond yield was at 3.06 percent, steady from late US trading and up from 3.03 percent in Asia on Monday.

Fears about Europe's debt crisis were alleviated somewhat by Spain's indication on Monday that it was opening the door to using public funds to aid the country's troubled lenders.

Treasuries had gained on Monday as the outcome of weekend elections in Greece and France raised concerns about the progress of European austerity steps and fuelled a rally ignited by downbeat US employment data. The latter raised hopes that the US Federal Reserve will eventually come up with more monetary stimulus steps.

But Richmond Federal Reserve Bank President Jeffrey Lacker said on Monday that further monetary stimulus would not do much for a US labour market that is plagued by longer-term, structural issues.

Lacker, an inflation hawk, has dissented three times this year against the Fed's guidance that it will probably keep interest rates near zero until at least late 2014. Lacker believes rates will have to rise in the middle of next year.