TOKYO: US 10-year treasuries extended overnight gains to nudge up in Asia on Thursday, building on a rally that saw longer-dated yields dip to their lowest in three weeks as worries over the euro zone debt crisis prompted safe-haven buying of US government debt.
Ten-year notes rose 6/32 in price to yield about 1.884 percent, having pierced below the lower end of this month's range of between roughly 2.17 percent to 1.95 percent. The yield was supported at its Nov. 23 trough at 1.8723. A dip below the line would take it to its lowest level since early October.
"The market is very thin today, so the price action may be a little exaggerated. That doesn't change the fact that risk sentiment is still very bearish and we will be facing more volatility towards the year-end," said Hiroki Shimazu, senior market economist at SMBC Nikko Securities.
Choppy trading is expected next week when investors have to absorb a very heavy supply calendar. Normally supply across the curve is spread out over a month, but the Treasury moved up its end-of-month auctions to avoid auctioning in the holiday week.
ECB policymaker Jens Weidmann delivered a blow to hopes of more decisive ECB intervention to quell the euro zone crisis, saying this week that his peers at the bank were growing sceptical of its bond-buy programme, which he openly opposes.
One focal point for the market is a forthcoming decision by Standard & Poor's on euro zone sovereign ratings. S&P warned earlier in December of a possible downgrade of 15 euro zone countries shortly after last week's European Union summit, and has yet to announce its decision.
Treasury Department announces weekly 3- and 6-month bill sale offerings, and announces sales of 2-, 5- and 7-year notes at 1600 GMT. It will also sell 5-year TIPS at 1800 GMT.
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