TREASURIES-Little changed in Asia, sell-off peters out

By Naomi Tajitsu

TOKYO, Feb 8 (Reuters) - U.S. Treasuries were little changed in holiday-thinned, Asian trade on Friday, keeping the benchmark 10-year yield near a three-week high hit the previous day after a weak 30-year auction prompted selling in longer-dated bonds.

The market took a breather after dismal demand at the 30-year offer triggered a jump in long-dated yields, stretching out the spread between two- and 10-year notes and steepening the yield curve. Climbing U.S. stocks had also added to selling pressure.

Market participants said that Asian trade had all but ground to a halt on Friday, as financial markets in China, Hong Kong, Taiwan, Singapore, Malaysia and Indonesia were closed for the Lunar New Year holidays.

Yasutoshi Nagai, chief economist for Daiwa Securities SMBC's economic research group, said investors had shed Treasuries even as a rate cut by the Bank of England on Thursday and emphasis by the European Central bank that the region's economy is slowing pointed to lower yields around the world.

A dismal reading of U.S. services sector data earlier in the week had added fuel to speculation of a possible recession, but Nagai said that did little to stop investors from selling bonds as they were aware that the latest flight-to-quality rally from the start of the year had pushed prices too high.

"Recent factors all warrant lower rates, but the market realises that bonds are just too expensive," Nagai said, adding that longer maturities were particularly weak as investors reckon that a flurry of Federal Reserve rate cuts may heighten inflation risks in the future.

Data a week ago showed that that 17,000 U.S. jobs were cut last month, marking the first labour market contraction in 4-½ years and raising fears of a recession, although a separate report showed a modest revival in manufacturing.

For more clues into how far the Fed will continue to cut rates, market participants awaited a speech by San Francisco Fed President Janet Yellen later in the day.