TOKYO: US Treasuries were supported in Asian trade on Tuesday, extending their rally from the previous day as the change in government in Italy failed to reduce the country's borrowing costs.
The 10-year US bond yield dipped to 2.05 percent from around 2.06 percent in late US trade as Italian bond yields rose again on Monday after yields at a 3 billion euro five-year Italian bond sale hit euro-era highs of 6.29 percent.
Though demand was enough to see the deal price below levels seen in the secondary market in early trading, investors remained jittery over whether Prime Minister designate Mario Monti can pull together reforms to win back investor confidence.
Nervous investors also moved into US bonds as a report showed industrial production in the euro zone fell in September, the most since early 2009, underscoring fears the euro zone is slipping into a recession.
The euro zone GDP flash estimate for July-September could exacerbate worries on the euro zone's dilemma of fiscal tightening hurting growth, if the data comes below market expectations for 0.2 percent growth from the previous quarter.
The euro zone GDP will be followed by important US data later in the day. Traders will be looking to whether October retail sales numbers maintain recent firmness in US indicators. Economists polled by Reuters estimated that retail sales rose 0.3 percent last month, slowing from a 1.1 percent increase in September.
Another set of data that will attract attention is the producer prices index. Economists polled by Reuters expect overall prices to have fallen 0.1 percent in October after a 0.8 percent jump in September.
The core index, with food and energy items excluded, is seen rising 0.1 percent from the previous month.
US Treasury investors will also hear from several Federal Reserve officials, including Chicago Fed President Charles Evans, the only FOMC voting member who voted for more monetary accommodation at the last policy meeting earlier this month.
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