TOKYO: US Treasuries dipped in Asia on Tuesday following sharp gains the previous day, as an expectation that the European Central Bank will act this week to ease the euro zone's debt problems kept investor demand in check.
The yield on the 10-year notes rose to 1.515 percent from 1.500 percent in late US trade on Monday. On Monday the yield fell 5.0 basis points, helped by month-end buying when some investors such as pension funds usually buy to keep their portfolio in line with the bond index.
Most investors were on the sidelines ahead of key events later in the week, including the Fed's policy meeting ending on Wednesday, Thursday's policy announcement from the ECB and Friday's payrolls data.
"The market has not yet fully priced in a chance that the ECB will start buying bonds. So if it does, the market could head lower," said Tomoaki Shishido, analyst at Nomura Securities.
"The Fed probably won't do anything but if we had a surprise there and if the payroll data comes in better than expected, we could see the 10-year yield rising 10 to 20 basis points," he added.
Some believe the Fed will hold its fire and mainly offer markets hopes of further action if conditions warrant. Others believe the Fed could undertake one or more steps, including purchases of bonds in the open market.
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