TOKYO: Benchmark US Treasury bonds edged down in Asia on Thursday ahead of a 30-year sale later in the session, but remained supported by deepening fears about the euro zone's debt crisis.
An Italian debt auction later in the session could signal whether markets are confident that country can avoid being the next one to need a bailout, while a Greek election on Sunday could determine whether it remains in the euro zone.
The Treasury Department will offer $13 billion in 30-year bonds on Thursday.
"There might be some position adjustments ahead of the 30-year sale, but it comes against the backdrop of the continuing European debt crisis, which will help support demand at the sale," said Tomoaki Shishido, bond analyst at Nomura Securities.
The yield on 10-year notes stood at 1.61 percent, up slightly from 1.60 in late US trade, but down from 1.65 percent in Tokyo on Wednesday.
The yields on 30-year bonds edged up to 2.72 percent from 2.71 percent in late US trade, but slipped from 2.76 percent in Tokyo on Wednesday.
On Wednesday, the Treasury sold $22 billion in new 10-year notes at record low-auction yields of 1.622 percent, with demand supported by fears about Europe.
In Greece, the latest published opinion polls showed conservatives who back the 130-billion-euro ($160 billion) bailout were running neck-and-neck with leftists who oppose the bailout but want to keep Greece in the euro zone.
Italy's debt sale will also be in focus on Thursday, as it offers up to 4.5 billion euros in bonds at a smaller-than-average auction.
Italy's Treasury is expected to pay more than 5 percent to sell up to 3 billion euros of a three-year bond it last issued in May at an average 3.9 percent rate. On Wednesday, Italy paid 3.97 percent on one-year paper, the highest yield in six months.
Spain, whose borrowing costs are also in the spotlight after a weekend deal to bail out its banking sector, faced a three-notch rating downgrade to Baa3 by Moody's on Wednesday, which said the bailout deal will add to the country's debt burden.
US economic data on Wednesday also underpinned demand for fixed-income assets. Retail sales fell 0.2 percent in May, declining for a second straight month, while producer prices fell 1 percent last month.
Disappointing figures add to expectations that the Federal Reserve will discuss further bond purchases at its next policy meeting scheduled for June 19-20. The central bank could opt to extend its bond purchases after its "Operation Twist" stimulus program expires at the end of this month.
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