TOKYO: Weak Chinese manufacturing data on Thursday helped put a floor under US Treasuries prices, which steadied after first extending losses in Asia in the wake of Federal Reserve Chairman Ben Bernanke's signal that the US central bank could begin tapering its asset-purchasing stimulus later this year.
China's factory activity slipped to a nine-month low in June as demand faltered, the flash HSBC Purchasing Managers' Index showed, heightening risks that a second-quarter slowdown could be sharper than expected.
Bernanke said on Wednesday that the economy is improving enough for the Fed to begin paring back the $85 billion it spends each month on Treasuries and mortgage-backed securities, with the goal of ending it in mid-2014. He said the Fed could opt to continue the purchases if the recovery were to regress.
His comments came after Fed policymakers issued a statement after its regular meeting that the central bank will maintain its asset purchases for now, but it did not include any indication the pace would continue beyond the end of this year, as some traders had hoped.
The yield on 10-year notes stood at 2.354 percent , from 2.356 percent in late US trade, after rising to a fresh 15-month high of 2.376 percent earlier in the Asian session.
The yield on 30-year notes was at 3.406 percent, compared with 3.419 percent in late US trade.
"Investors will be closely watching US employment indicators from now, particularly the US payrolls report next week," said Tomoaki Shishido, rate analyst at Nomura Securities in Tokyo.
"Japanese investors are still concerned about the direction of US rates," he said.
apanese investors were net sellers of foreign bonds for a fifth straight week, according to weekly capital flows data released by the Ministry of Finance on Thursday.
They sold a net 402.5 billion yen of foreign bonds in the week through June 15 after selling a net 394.4 billion yen the week before.
Yields on Japanese government bonds also rose on Thursday, with the yield on the benchmark 10-year bond rising 2 basis points to 0.810 percent.
Crdit Agricole strategists said in a note on Thursday that they expect the spread between US and Japanese benchmark yields to widen further to around 185 basis points by the end of 2013.
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