TOKYO: US Treasury bond prices extended losses in Asia on Wednesday, with yields moving further away from record lows as investors locked in gains ahead of a European Central Bank policy meeting later in the session and remarks from Federal Reserve Chairman Ben Bernanke later this week.
The European Central Bank (ECB) holds its monthly rate setting meeting later on Wednesday, after Spain warned on Tuesday that it was losing its access to credit markets and needed help from Europe to prop up its banks.
Market players also awaited Fed chief Bernanke's testimony before Congress on Thursday, for the latest signals on whether the central bank is going to extend its bond purchases.
"Today the focus is on (European Central Bank President Mario) Draghi, tomorrow it's Bernanke, and what they might say," said Hiroki Shimazu, bond strategist at SMBC Nikko Securities.
"I want to see how Bernanke can coordinate all the different hints that are emerging from different Fed officials, about the outlook for more easing," he added.
Disappointing employment data on Friday has increased expectations that the Federal Reserve will buy more bonds to support the economy. The US Labor Department reported that only 69,000 jobs were created in May, far short of economists' expectations.
Chicago Fed President Charles Evans said late on Tuesday that the May US jobs report will likely dampen his own expectations for US economic growth.
"It's hard to imagine that our outlook isn't going to soften a little bit (though) it may not change dramatically," Evans told reporters in New York, and said that more asset purchases would be a step in the right direction.
But St. Louis Fed President James Bullard and Dallas Fed President Richard Fisher suggested on Tuesday that the economic outlook had not deteriorated to the point where further easing action was warranted this month.
The yields on 10-year notes rose to 1.59 percent from 1.55 percent in late U.S trading and from 1.53 percent in Tokyo on Tuesday.
On Friday, following the dismal employment report, they fell to a record low of 1.44 percent. That was nearly a full point below their mid-March high of 2.40 percent.
The yields on 30-year bonds rose to 2.65 percent from 2.61 percent in late US trade and from 2.58 percent in Tokyo on Tuesday.
Still, continued uneasiness about Europe's debt turmoil kept losses in check. Sources told Reuters that no decisions can be made about recapitalising Spain's ailing banks until the first phase of an independent banking audit is completed this month.
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