TREASURIES-Bonds under pressure, 10-year yield at 10-month high

TOKYO Thu Feb 14, 2013 12:55am EST

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TOKYO Feb 14 (Reuters) - U.S. Treasuries were on the defensive on Thursday, with the 10-year yield briefly touching a 10-month high in Asia after a tepid sale of 10-year debt the previous day stoked concerns of a further fund shift out of bonds to riskier assets.

* On Wednesday, the Treasury sold $24 billion in 10-year notes at a high yield of 2.046 percent, above what the market had expected.

* The yield on the new notes rose to as high as 2.061 percent in Asian trade, the highest for the current 10-year notes since April last year, rising above the Feb. 4 high of 2.0590 percent.

* Treasury yields could make a clear break above their recent trading ranges if an upcoming auction of $16 billion 30-year bonds later in the day also fails to attract strong demand. The 30-year yield stood at 3.238 percent, just under a 10-month high of 3.254 percent hit last week.

* The rise in yields came even after data showed on Wednesday U.S. retail sales barely rose in the month as tax increases and higher gasoline prices restrained spending.

* Many investors expect global growth to gain momentum this year as the euro zone shows some sign of stability while the Chinese economy rebounds, reducing the attraction of bonds.

* Investors are now focused on a package of automatic spending cuts, which are due to kick in on March 1 unless lawmakers agree on alternative budget measures or delay negotiations to a later date.

* While concerns about spending cuts could prop up Treasuries for now, some traders are of the view the market may have already priced in these cuts to some degree.

* Senate Republican leader Mitch McConnell said on Tuesday he expects across-the-board cuts, known as sequester, to begin on schedule.

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