TOKYO: Benchmark US Treasury bonds dropped sharply in Asia on Monday, with investors shedding safe-haven assets as they looked to take more risk after euro zone finance ministers agreed to prop up Spain's debt-laden banks.
European financial leaders agreed to lend Spain up to 100 billion euros ($125 billion) for its bank rescue fund, alleviating much of the fear of debt contagion from that country.
European Union Economic and Monetary Affairs Commissioner Olli Rehn told Reuters in an interview a day after the Spanish loan agreement that the deal requires reforms for Spain's banking sector but places no new conditions on the wider economy.
But Greek elections that could determine whether the country remains in the euro zone loom on June 17, potentially cutting short the effects of the news from Spain.
Moody's Investors Service said on Friday that a Greek exit from the euro could pose a threat to the currency's existence.
"The fall in bonds today is understandable in light of what happened in Spain's case over the weekend, but continued uncertainty ahead of next weekend's Greek elections will likely keep losses in check," said a fixed-income fund manager at a Japanese trust bank in Tokyo.
The yields on 10-year notes rose to 1.71 percent from 1.64 percent in late US trade and 1.61 percent in Tokyo on Friday, moving further away from their record low of 1.44 percent touched on June 1.
The yields on 30-year bonds climbed to 2.84 percent from 2.76 percent in late US trade and 2.71 percent in Tokyo on Friday.
On the supply side, the Treasury Department will this week sell $32 billion in new three-year notes and reopen a 10-year note issue by $21 billion and an older 30-year bond issue by $13 billion.
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