Dip in Asia ahead of auctions, Bernanke

TOKYO: US Treasuries came under slight downward pressure in Asia on Wednesday as investors lightened positions ahead of a 10-year sale and testimony by Federal Reserve Chairman Ben Bernanke, while a rise in Asian stocks also weighed.

Treasuries are expected to stay underpinned as worries about the European debt crisis spur safety bids, but uncertainty over the US debt ceiling will likely limit gains, traders said. Congress has until Aug. 2 to approve new borrowing to avoid a default.

"The current bullish trend in the Treasury market has been in place since last week's weaker-than-expected jobs data, but the market is a bit nervous now as it is not clear how the US debt ceiling issue will be resolved," said Shinichiro Kadota, a none-yen strategist at Barclays Capital Japan.

"Yields are near the levels that we saw in late June, but it could be a bit difficult to extend purchases from here due to uncertainty over the debt ceiling."

Ten-year notes fell 5/32 in price to yield 2.895 percent , up almost 2 basis points from late US trade the previous day. Thirty-year bonds also fell 5/32 in price, to yield around 4.179 percent.

September T-note futures inched up by 1.5/32 to 124-21.5/32. Trading was active in Asia with volume totalling 46,000 lots.

The US Treasury on Wednesday will hold a $21 billion reopening of a 10-year note issue originally sold in May, followed by a $13 billion reopening of a 30-year bond issue on Thursday.

The market will also be focusing on Bernanke's semiannual testimony on the economy before the House Financial Services Committee, beginning at 1400 GMT.

The market showed muted reaction to China's gross domestic product data, which grew a stronger-than-expected 9.5 percent in the second quarter from a year earlier.

Copyright Reuters, 2011