TREASURIES-Bonds firm on fiscal cliff, Greece anxiety

TOKYO Tue Nov 13, 2012 10:10pm EST

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TOKYO Nov 14 (Reuters) - U.S. Treasuries were firm in Asia on Wednesday, with the 10-year notes yield staying near two-month low, on worries about the fiscal cliff and a lack of consensus among Athen's international lenders on steps to support Greece.

* The yield on ten-year notes stood at 1.600 percent , not far from Tuesday's low of 1.5725 percent, which was its lowest level since early September.

* Treasuries extended gains after last week's re-election of President Barack Obama on fears Democrats and Republicans could prolong squabbling over the "fiscal cliff" - the $600 billion in spending cuts and tax increases set to kick in early next year that could send the economy back into recession.

* The full cast of lawmakers in the debate gathered in Washington on Tuesday for the first time since the elections, setting the stage for a week of trial balloons and rhetorical repositioning in the race to avoid the cliff.

* Some market players think worries in the market may be overdone, given that the U.S. economic fundamentals appear to have been improving in recent months.

* "I expect they will reach a stopgap measure at the very last minute, as they did at the time of negotiation on debt ceiling. At the moment, the market is becoming risk-off but I think the concerns will fade and the Treasury yield could test a high of 1.80 percent," said a fund manager at a U.S. asset management firm.

* Still, others say the risk-off mood in financial markets is likely to continue for now, as U.S. investors are likely to sell shares, expecting higher tax rate on dividend and capital gains next year.

* "The risk at the moment is for yields to fall further. For, before the election, many investors had been cautious about Treasuries, preparing for a possible victory of (Republican challenger Mitt) Romney," said a trader at a Japanese bank.

* Also helping Treasuries, Europe is also still battling to fix its problems as the euro zone finance ministers and the IMF fail to agree on a long-term budget goals for Athens and on the IMF's push for the euro zone to take further losses on Greek debt.

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