TREASURIES-Bonds steady in Asia, 10-yr yield off 2-month low

TOKYO, April 3 Tue Apr 2, 2013 10:16pm EDT

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TOKYO, April 3 (Reuters) - U.S. Treasuries steadied in Asia on Wednesday, after slipping the previous day as worries of a major banking crisis in the euro zone receded and as investors braced for a solid recovery in U.S. employment.

* The yield on the 10-year notes was little changed at 1.861 percent. It rose about 3 basis points on Tuesday after hitting a two-month low of 1.823 percent in Asian trade.

* Although weak U.S. manufacturing data on Monday helped to drive down the 10-year yield to a two-month low, stable euro zone debt markets boosted investors' risk appetite.

* Italian and Spanish bond prices rose as investors scaled back concerns that a draconian international bailout of Cyprus could set off a wider bank run in the euro zone.

* Wall Street shares also rallied to record highs, with both the S&P 500 and Dow Jones index closing at record highs, undermining the attraction of Treasuries.

* Furthermore, investors are expecting Friday's U.S. jobs data, the most important event of the week, to show payrolls gained a net 200,000 in March, well above its trend since the U.S. economy recovered from the 2008 financial crisis.

* Still, Treasuries were underpinned by expectations the Federal Reserve will keep buying bonds for the time being to knock down unemployment further.

* "U.S. bond yields also look attractive, comparatively speaking, as yields on Japanese and German bonds are falling sharply," said a trader at a Japanese bank.

* The 10-year Japanese government bond yield is flirting with 10-year lows near 0.5 percent on hopes of aggressive monetary easing by the Bank of Japan. German Bunds yield about 1.31 percent, not far from its eight-month low near 1.25 percent hit last week on worries about Cyprus.