TREASURIES-Bonds firm as signs of US slowdown underpin

TOKYO, April 23 Mon Apr 22, 2013 9:58pm EDT

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TOKYO, April 23 (Reuters) - U.S. Treasuries prices stayed firm in Asia on Tuesday after small gains the previous day, with the 10-year yield stuck near four-month lows, on signs of an economic slowdown and low inflation in the United States.

* The benchmark 10-year notes traded at a yield of 1.696 percent, little changed from late U.S. levels and near four-month lows of 1.673 percent hit last Wednesday. It fell about one basis point on Monday.

* Although Treasuries yields briefly rose on Monday as the re-election of Italian President Giorgio Napolitano raised hopes for the formation of a new government in Italy, reducing safe-haven bids for bonds, concerns about the softening U.S. economic picture overwhelmed the market in the end.

* A string of weak data, including payrolls earlier this month, and a recent fall in commodity prices have fanned expectations that U.S. inflation could slow further, killing chances of the Federal Reserve tapering its bond buying program anytime soon.

* Last week, the government reported that U.S. consumer prices fell in March for the first time in four months. In the 12 months through March, consumer prices rose just 1.5 percent, sparking talk that the U.S. economy could face the threat of deflation.

* Some investors who had been cautious on Treasuries on the view that the Fed could start winding up its bond buying some time this year are rushing to buy Treasuries, according to traders.

* "I expect the market's firm trend will continue until the next payrolls data. But the previous payrolls data could have been affected by bad weather, so if the next reading improves then the market may regard the weakness in March as a temporary one," said Hiroki Shimazu, senior market economist at SMBC Nikko Securities.

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