TREASURIES-U.S. bonds edge up in Europe but gains fragile
LONDON, Feb 6 (Reuters) - U.S. Treasury prices firmed in Europe on Wednesday with market jitters about political tensions in Italy and Spain propping up demand for low-risk assets. Investors were also keeping an eye on a weakening Japanese yen, which prompted selling of long-dated hedges on debt securities known as power reverse dual currency notes. That weighed on Treasuries prices, pushing yields up. "There's no top-tier data in the U.S. and with no auctions this week it looks like we're vulnerable to what's going on in peripheral markets in Europe and in the FX market," a trader said. "The market has been volatile. Trade is still jittery and choppy. Europe opened on a firmer tone and Bunds have got a bit of a bid so we're following suit but that's very near-term price action." The 10-year T-note was last 5/32 higher in price to yield 1.987 percent, retreating from a 9-month peak of 2.059 percent marked intra-day on Monday. Benchmark 10-year notes have underperformed shorter-dated maturities, steepening the yield curve, on recent signs of a U.S. economic recovery and strength in equities, coupled with the Federal Reserve's accommodative monetary policy. The 2-year/10-year yield spread stands at roughly 175 basis points , having widened from about 151 basis points at the end of last year. "Quarterly funding today will show us which way issuance is going to be biased ...but given the absence of major data this week we'll take our cue from what's happening externally," said RIA Capital Markets strategist Nick Stamenkovic. "Until we get clearer signs of how the U.S. economy is performing Treasuries are pretty rangebound."
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