TREASURIES-Bonds steady as stock market rally pauses; ECB in focus

TOKYO Wed Feb 6, 2013 11:52pm EST

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TOKYO Feb 7 (Reuters) - U.S. Treasuries stabilised in Asia on Thursday, as the rally in global shares paused and the market looked to the European Central Bank's policy meeting later in the day.

* The yield on 10-year notes stood at 1.962 percent, little changed from late U.S. levels, after having fallen about five basis points on Wednesday.

* Although investors are cautiously optimistic about the global economic outlook, concerns that possible political instability in Italy and Spain could hit the European economy anew are curbing risk appetite, helping to underpin Treasuries.

* "It seems like there are solid bids (for 10-year notes) from investors at two percent or above," said a trader at a Japanese bank.

* The 10-year yield has been stuck in a range around two percent for the past two weeks as the market is also supported by the Federal Reserve's constant bond buying.

* For now the market is looking to the ECB meeting. The ECB is widely expected to keep rates on hold but some market players expect Governor Mario Draghi to tone down his upbeat assessment on the euro zone economy at his press conference.

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