LONDON Nov 20 U.S. Treasury debt prices slipped in Europe on Tuesday with investors hopeful that lawmakers may reach a deal to avert a budget crisis that could send the economy into recession.
* Treasuries initially steadied in Asian trade after credit rating agency Moody's stripped France of its triple-A rating, but with the move widely expected, bond prices retreated.
* A sell-off in Treasuries was mitigated by bets that even if U.S. lawmakers were to reach a deal to avert the so-called "fiscal cliff", any compromise on the $600 billion of spending cuts and tax hikes due to come into effect in early 2013 would still erode growth.
* "If you do have an agreement on the fiscal cliff one way or another, there's still going to be some kind of drag on GDP going forward. So going into year-end we're still going to see buying on dips," a trader said.
* Benchmark U.S. T-note yields were last 1.7 basis points up at 1.63 percent, pulling away from the 2 1/2-month low of 1.556 percent hit on Friday.
* The 30-year T-bond yield was last two bps up at 2.778 percent with traders seeing little scope for the yield to rise significantly in the near-term given scepticism on how soon Congress would agree a deal on the budget.
* "The rally we saw last week is fading a little but it's going to take something mega-bullish on the fiscal talks for the market to sell off," another trader said.
* The market's immediate focus on Tuesday is a speech by Federal Reserve Chairman Ben Bernanke in New York at 1215 local time (1715 GMT). Treasuries have been supported by speculation that the Fed is likely to unveil a new stimulus plan in December, when "Operation Twist" is set to expire.