TOKYO: The yield on US 10-year Treasury notes edged down in Asia on Thursday toward a three-month low hit earlier in the week, on concerns about the effectiveness of the European Central Bank's first three-year loan tender.
The ECB drew strong demand for its closely watched first offer of cheap, three-year loans on Wednesday, which eased some concerns over bank funding in the region.
But Treasuries were supported in Asia on Thursday, as Asian shares fell and the euro struggled on doubts about how much of the ECB funds that banks raised from the tender will actually flow into struggling euro zone economies and help restore confidence.
"With many traders away for the holidays, we might not see much movement in Asia from now until the end of the year, but to the extent that yields do move, they are more likely to keep moving in a downward direction, with continuing demand in uncertain times," said a market participant at a Japanese bank in Tokyo.
Ten-year Treasuries edged up, pushing yields to 1.9615 , down from 1.97 percent in New York but up from 1.9320 percent in Tokyo on Wednesday. On Monday, the yield hit 1.798 percent, marking its lowest level since October 4.
Treasuries have rallied recently, supported by nervousness over the euro zone's sovereign debt crisis and as investors move to bolster balance sheets by buying low-risk assets heading into the end of the year.
This flight to safety was visible in weekly data from Japan's finance ministry that showed foreign investors bought the second-biggest net amount of Japanese short-term bills on record in the week to Dec. 17, buying 2.66 trillion yen worth ($34.11 billion) as foreign banks and sovereign investors shifted funds to the perceived safety of yen bills, with yields on US notes stuck close to zero.
But 30-year bonds have underperformed as investors unwound yield-curve-flattening trades designed to profit from the Federal Reserve's purchases of longer-dated debt as part of its "Operation Twist" programme aimed at lowering long-term borrowing rates.
The yield on 30-year bonds eased to 2.988 from 3.01 in New York, but it was above Wednesday's 2.93 percent in Tokyo.
The Fed completed this year's final buyback of long bonds on Tuesday, and will buy up to $5 billion in notes of maturities of around 10 years on Thursday.
In an auction on Wednesday, $29 billion in new seven-year debt sold at a high yield of 1.43 percent and priced around 1 basis point higher than where the debt had traded before the sale.
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