TOKYO: US Treasuries were supported in Asia on Thursday as market players braced for French bond auctions later in the day to gauge investors' appetite for European sovereign debt.
The 10-year note yield stood at 1.97 percent, down slightly from 1.98 percent in late US trade. It briefly rose above 2.0 percent on Wednesday following upbeat factory orders data.
Still, overriding concerns about the European debt crisis maintained the safe haven allure of US bonds, as investors look to upcoming bond auctions in Europe.
France offers long-dated bonds on Thursday as investors fret about a possible credit downgrade of the euro zone's second-biggest economy. Debt auctions in Italy and Spain will follow next week.
"There aren't many investors who can take risks now. There will be strong demand for 10-year Treasuries at a yield of around 2.1 percent," said a trader at a Japanese bank.
The yield curve has steepened this week as market players prepare for the auctions of 10- and 30-year US Treasuries next week.
The yield spread between two- and 30-year bonds stood at 276.5 basis points, near a three-week high of 277 basis points set on Wednesday.
More investors reduced US Treasuries in their portfolios in the latest week as some optimism about a strengthening US economy curbed the appetite for low-risk government debt, according to a survey released on Wednesday.
The share of investors who said on Tuesday they were short, or owned fewer Treasuries than their portfolio benchmarks, rose to 23 percent from 15 percent the previous week, the highest level of short positions since early August, J.P. Morgan Securities said in its weekly Treasury client survey.
Investors are also looking ahead to the ADP National Employment Report on Thursday, as a precursor to Friday's payrolls data.
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