US 10-year note dips as equities rise

SINGAPORE: US 10-year Treasuries slipped in Asia on Monday as equities rose on hopes that European policymakers will come up with conmvincing measures soon to ease the euro zone's debt crisis and recapitalise the region's banks.

The 10-year note dipped around 4/32 in price to yield 2.266 percent , up roughly 2 basis points from late US trade on Friday. In the stock market, US S&P futures rose 0.5 percent in early Monday trade in Asia, building on gains made last week.

The 10-year note is now hovering close to support that comes in at around 2.266 percent, the 38.2 percent retracement of a July to September rally in 10-year notes. More support is clustered near 2.3 percent to 2.31 percent, an area containing a few daily highs hit in late August.

However, such technical levels may not mean too much at this point, when traders are focusing on the possibility that the European banking sector's recent woes may be resolved, said a trader for a US brokerage house in Tokyo.

"My general outlook on the market is that we're trending towards higher yields, because basically the risk that there is going to be some sort of liquidity crunch from the European banking sector has somewhat attenuated," the trader said.

The 10-year yield has climbed about 19 basis points after the leaders of Germany and France pledged earlier in October to unveil a comprehensive package for solving the euro zone's debt crisis by the end of the month, including an agreement on how to recapitalise banks.

The onus is now on European policymakers to iron out details at a European Union summit on October 23.

Copyright Reuters, 2011