TREASURIES-Steady in Asia after surge on recession fears

By Satomi Noguchi

TOKYO, Feb 22 (Reuters) - U.S. Treasuries steadied on Friday in Asia, holding big gains scored the previous day after poor economic data on regional factory activity fuelled fears of a U.S. recession.

Treasuries surged across the curve on Thursday after the Philadelphia Federal Reserve's business conditions index fell to its lowest since the 2001 recession, boosting expectations for a hefty Fed interest rate cut next month. [ID:nN21572086]

"The weak data triggered a surge in Treasuries overnight. But a large part of the price action looked like a reverse of earlier moves this week when long positions in bonds were cut," said a manager of the securities investment group at a Japanese trust bank.

The benchmark 10-year note <US10YT=RR> was little changed in price to yield 3.784 percent, flat from late U.S. trade on Thursday but down from a seven-week high of 3.962 percent hit earlier this week.

The 30-year bond <US30YT=RR> rose 1/32 in price to yield 4.555 percent, down a basis point from late New York trade and pulling further away from a three-month high of 4.721 percent hit on Wednesday.

The two-year note <US2YT=RR> edged down 1/32 in price to yield 2.001 percent, up 2 basis points. On Thursday, the two-year yield tumbled below 2.0 percent towards a four-year low hit last week, sliding more than 20 basis points from the peak of the day.

Many market players expect the Fed to slash benchmark interest rates by another 50 basis points at its next meeting in March, taking them to 2.50 percent after cuts totalling 125 basis points in January to forestall a deeper economic slump.

But the Japanese trust bank manager said the two-year yield looked unlikely to stay below 2.0 percent as some investors doubts the Fed can keep cutting rates aggressively with inflation still high. [ID:nN20341810]