US 10-year notes dip, eyes on Europe

SINGAPORE: US 10-year Treasury notes edged lower in Asia on Thursday with the focus on whether European policymakers will make progress on measures to contain the euro zone's debt crisis.

Although market players expect the German parliament to pass a bill on new powers for the European Financial Stability Facility (EFSF), a focal point is whether there will be many dissenters within German Chancellor Angela Merkel's ruling coalition, said a trader for a US brokerage in Tokyo.

"That would be perceived as a somewhat of a risk-off event," the trader said.

Ten-year Treasuries dipped around 1/32 in price to yield 1.992 percent, up 1 basis point from late US trading on Wednesday. The 10-year yield had hit a 60-year low of 1.674 percent last week.

Positioning in the market may still be somewhat long, said the trader for a US brokerage.

Treasuries were also "struggling to gain footing" due to the possibility that European policymakers could make progress on steps to contain the euro zone's debt crisis, such as creating a scheme similar to the US government's Troubled Asset Relief Program (TARP) to shore up confidence in the European banking sector, the trader said.

Treasuries showed limited reaction to comments by US Federal Reserve Chairman Ben Bernanke, who said on Wednesday the central bank might need to ease monetary policy further if inflation or inflation expectations fall significantly.

Later on Thursday, focus will also turn to a $29.0 billion auction of 7-year Treasuries.

Copyright Reuters, 2011