TOKYO: US Treasuries were supported in Asia on Thursday, bolstered by investor concerns that protracted gridlock in Washington could cause a budget crisis that would send the economy reeling.
The yield on 10-year notes stood at 1.593 percent , little changed from late US levels and just above its 10-week low of 1.572 percent hit on Tuesday.
If the White House and a divided Congress do not produce a deal on the federal budget before year-end, a series of automatic tax hikes and spending cuts known as the fiscal cliff will phase in early in 2013.
President Barack Obama said on Wednesday that Republicans would have to agree to raise taxes on the wealthy as the first step in a budget deal. But top Republican lawmakers have been steadfast in pushing to hold down tax rates for top earners.
Few market players expect a compromise between the Democrats and the Republicans any time soon, and that is likely to suggest firm support for Treasuries in coming weeks.
"You can't expect any progress before the Thanksgiving (on Nov. 22). If they are moving towards a compromise deal, then perhaps we may hear some news of progress in the first week of December," said Tomoaki Shishido, fixed income analyst at Nomura Securities.
The market also drew support from minutes of the Federal Reserve policy meeting in October, in which a number of officials reckoned the central bank would need to ramp up its bond purchases to help the economy.
The minutes showed a number of Fed officials thought the central bank would need to buy more bonds when its "Operation Twist" expires at year-end.
That cemented market expectations that the Fed will keep buying the same amount of bonds, about $85 billion each month, next year.
San Francisco Fed President John Williams said late on Wednesday the Federal Reserve likely will keep buying both mortgage-backed securities and Treasuries until late 2013.
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