LONDON: US Treasury yields nudged higher in Europe on Tuesday but may fall later if minutes from the Federal Reserve's latest policy meeting sound a cautious note on economic recovery.
After recent mixed US data, investors and dealers are keen to see how the Fed viewed the world's largest economy when it slightly upgraded its outlook last month.
The minutes of the Fed's March 13 meeting are due at 1800 GMT and the central bank is likely to warn again that premature tightening of monetary policy would be risky, while keeping an open-minded, but uncommitted view on further easing .
Data on Monday showed the US economy was growing only gradually. The numbers, coming after Fed Chairman Ben Bernanke said last week it was too early to declare victory in the economic recovery, pointed to range-bound trade in Treasuries.
Benchmark 10-year Treasury yields were half a basis point higher at 2.18 percent, having retraced around half their gains made in mid-March. T-note futures were 3/32 higher at 129-51/64.
"A substantial hawkish re-pricing of the fed funds rate after the FOMC (meeting) statement clearly proved to be an over-reaction," Lloyds Bank strategists said, adding the minutes could see the reversal in yields of recent days go further "if the description of the overall tone is in line with the cautious outlook highlighted by some members recently."
Lloyds added that, as a result, it expected 10-year US yields to retest 2.09 percent if it broke below the 200-day moving average which comes in around 2.19 percent, close to current levels.