US 10-yr notes notch up in Asia as equities sold

TOKYO: US 10-year Treasuries edged higher in Asia on Thursday as equities were sold off across the region, but buying was lukewarm as investors warily awaited the outcome of deadlocked talks on raising the US government's borrowing limit.

Treasuries rebounded a bit after prices eased on Wednesday on a lacklustre auction of $35 billion in five-year notes, with traders citing concerns over the debt ceiling talks. The auction drew tepid overseas interest but above average interest from domestic buyers. It had a "tail" or high yield that was above investors' expectations.

A bill to cut the US deficit faced a nail-bitingly close vote in Congress on Thursday as the top Republican lawmaker sought to quell an internal revolt and push his plan to avoid a ruinous default.

Defeat of the bill could deepen the crisis, swinging the momentum toward a rival Democratic plan in the Senate but leaving no clear way to overcome entrenched opposition from fiscally conservative Tea Party Republicans in the House.

Worries over risks of a downgrade to the top-notch US credit rating, and uncertainty over whether Congress would raise the government's $14.3 trillion borrowing limit in time to avert a default, have dented Treasuries this week.

US 10-year notes rose 4/32 in price to yield 2.97 percent , down slightly from 2.98 percent in late US trade. Ten-year note futures rose 0.13 percent to 124-12.5/32

Despite heavy losses sustained on Asian bourses, S&P stock futures edged up around 0.2 percent. MSCI's index of Asia-Pacific shares outside Japan was down 1.1 percent . The Nikkei average shed 1.5 percent.

The Treasury will sell seven-year notes on Thursday and the US government will release the latest weekly count of new jobless claims, expected to total 415,000 for the week ended Saturday, according to economists polled by Reuters, versus 417,000 new claims a week earlier.

This week's auctions are the last bond sales before the Aug. 2 deadline to raise the $14.3 trillion federal debt limit. All three note issues auctioned this week settle on Aug. 1.

Copyright Reuters, 2011