Bonds edge down a tad after Greek coalition deal

TOKYO: US Treasuries fell in Asian trade on Monday after Greek political parties sealed a deal to form a tentative coalition to approve a euro zone bailout before early elections, easing fears of an imminent disorderly default.

The yield on ten-year notes rose as high as 2.08 percent from 2.04 percent in late US trade, though it later stepped back to around 2.06 percent.

Greek Prime Minister George Papandreou reached an agreement on Sunday with the opposition on forming a coalition to approve a euro zone bailout before early elections, breaking an impasse after the EU demanded a rapid end to political bickering in the country.

The deal was thin on details, however, with the new prime minister still to be decided.

Escalating worries of a sell-off in Italian bonds also kept in check any unwinding of safe-haven buying of US Treasuries.

"The market has recently been moving solely on Greece headlines, which makes trading very difficult. But I think the bigger problem is Italy as many investors have exposure to the country," said Arihiro Nagata, manager of foreign bond trading at Sumitomo Mitsui Banking Corp.

"The Italian 10-year bonds are now yielding around 6.4 percent, which is the same level at which both Ireland and Portugal asked for help," he added.

Copyright Reuters, 2011