TOKYO: US Treasury prices eased in Asia on Tuesday as firm US share prices and Asian stocks prompted light selling ahead of a two-year note auction later in the day.
A wait-and-see mood prevailed, however, in the run up to Federal Reserve Chairman Ben Bernanke's speech on Friday at the Fed conference in Jackson Hole, Wyoming.
Market participants concentrated on adjusting their positions before $99 billion of bond auctions this week. The Treasury Department will sell $35 billion of two-year notes in an auction set for 1700 GMT.
It will offer $35 billion of five-year notes on Wednesday and $29 billion of seven-year paper on Thursday.
"Although there is no reason to completely rule out potential monetary easing, Bernanke may not provide hints of QE3 this week," said Hideki Kishida, a fixed income analyst at Nomura Securities.
"Failure to comment on possible QE3 may trigger heavy sales of Treasuries and put pressure on share prices, but we are focusing on US jobs numbers and other data to see how the Fed will react at its policy meeting in mid-September," he said.
Share prices climbed broadly in Asian trade, with Korean stocks up 3.2 percent and Shanghai shares rising 0.6 percent.
September S&P stocks futures advanced 0.6 percent to 1,129.70.
Benchmark 10-year Treasury notes fell 2.5/32 in price to yield around 2.118 percent , up about 1 basis point from late US trade the previous day.
The 10-year yield had dipped to around 1.98 percent last week, its lowest in at least 60 years.
Thirty-year bonds fell 13.5/32 in price to yield 3.445 percent , down around 2 basis point from the day before.
September 10-year T-note futures fell 2.5/32 to 130-16.5/32 from Monday. Trading was light at 22,513 contracts by early afternoon Asian trade.
Japanese banks had been cited as trading actively during price rallies earlier in the month, but other institutional investors, such as life insurers, mostly stayed on the sidelines as they were reluctant to shift fresh funds into low-yielding Treasuries, Tokyo traders said.
COPYRIGHT REUTERS, 2011
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