LONDON: US treasuries were little changed on Tuesday ahead of a bout of supply this week and as a setback in crucial Greek debt swap talks gave safe-haven German debt only a modest boost.
Ten-year US government bond yields were little changed at 2.07 percent, not far from the previous day's peak at 2.09 percent - its highest since Dec 8. Two-year bond yields were steady at 0.24 percent.
Euro zone finance ministers on Monday rejected as insufficient an offer made by private bondholders to help restructure Greece's debts, sending negotiators back to the drawing board and raising the threat of a Greek default.
Despite this, some analysts said markets were still expecting a last-minute deal. One analyst said positioning against the gloom-and-doom consensus was a profitable trade and partially explained the market's sanguine reaction.
"Everyone thinks the euro is going to collapse, everyone thinks it's unsolvable, that's the consensus ... generally you don't want to be positioned with the consensus, do you?" Charles Diebel, head of market strategy at Lloyds Bank said. "We are negative on core bond markets in the short-term."
On Tuesday, the Treasury will sell $35 billion in two-year notes, followed by $35 billion of five-year notes on Wednesday, and $29 billion of seven-year notes on Thursday.
In the absence of a deal on the Greek debt swap talks, one trader expected 10-year Treasury bond yields to fall back below 2 percent.
"Everyone was pretty bullish when the market was trading at 1.85 (percent)and now we are trading north of 2 percent, people think there might be the beginning of a bear channel," he said. "I am not of that camp. I think that there is going to be a lack of clarity in the euro zone which will continue to favour the flight-to-quality bid."
The Federal Reserve also begins its two-day meeting on Tuesday. It will begin a new practice of announcing policymakers' interest rate projections when the meeting ends on Wednesday.
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