Bonds steady in Asia after drop on Bernanke

TOKYO: US Treasuries barely budged in Asia on Wednesday, stabilising after a big fall the previous day following comments by Federal Reserve Chairman Ben Bernanke that the central bank is ready to take more steps to help the US economy.

"Bernanke is not ruling out the possibility of QE3. His comments were quite a bit stronger than the Fed's statement after its policy meeting in September," said Shinichiro Kadota, a non-yen strategist at Barclays Capital.

Bond prices reversed an early rise on Tuesday also on hopes that European policy-makers will take steps to safeguard their banks. In an attempt to contain the problem, France and Belgium will guarantee the financing of ailing Dexia, the first government bailout of a European bank in the euro sovereign debt crisis.

But market players remain deeply worried about the health of the financial sector, with the CDS premium on many European and US financial institutions staying high.

"In the near term, US Treasury yields will be tied to banking shares. As euro-zone finance ministers have postponed their decision on Greece, it's hard to expect progress in the next few weeks," said Tomoaki Shishido, a fixed-income analyst at Nomura Securities.

On the other hand, growing tensions between China and the United States over a bill in Congress on forcing Beijing to let its currency rise stoked worries about a trade war. China is the biggest holder of US Treasuries.

The yield on 10-year notes stood at 1.83 percent, compared to 1.82 percent in late US trade.

Copyright Reuters, 2011