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imageNEW YORK: US Treasuries yields fell on Tuesday as European bond yields fell to record lows on expectations the European Central Bank may ease monetary policy as soon as next week.

ECB President Mario Draghi said on Friday the bank was prepared to respond with all available tools if euro zone inflation drops further. Investors took this to mean the ECB could start an asset purchase program or other stimulus measures.

The next ECB policy meeting is on Sept. 4. Preliminary euro zone data due on Friday are forecast to show annual inflation was just 0.3 percent this month, down from 0.4 percent in July, and well below the ECB's target of just under 2 percent.

"It's tough for Treasuries to sell off here given what's going on in Europe," said Gennadiy Goldberg, interest rate strategist at TD Securities in New York.

Benchmark 10-year Treasuries were last up 5/32 in price to yield 2.38 percent, down from 2.39 percent late on Monday.

German 10-year government bond yields, by comparison, fell to 0.94 percent.

Concerns over tensions in Ukraine is also helping maintain a safety bid for US Treasuries.

Ukraine released a video of captured Russian soldiers on Tuesday, sharply escalating a dispute over Moscow's alleged backing for separatist rebels in the east of the former Soviet republic.

Europe is taking center stage as the US economic calendar is relatively light until the release of August's employment report on September 5. The Federal Reserve is then due to meet on September 15 and 16.

"We don't have much on the US monetary front in the next few weeks, which is letting the Ukraine tensions creep back into the market's crosshairs," Goldberg said.

Treasuries failed to react to mixed US economic data.

Orders for long-lasting US manufactured goods posted their biggest gain on record in July on strong international demand for aircraft, but the underlying trend remained consistent with a steady pace of domestic economic growth.

US single-family home prices fell 0.2 percent in June and fell short of expectations, according to the S&P/Case Shiller composite index of 20 metropolitan areas.

The Treasury is also due to auction $29 billion in two-year notes on Tuesday, the first in $93 billion in new coupon-bearing supply this week. The government will also sell $35 billion in five-year notes on Wednesday and $29 billion in seven-year notes on Thursday, as well as $13 billion in two-year floating-rate notes on Wednesday.

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