TREASURIES-Steady in Asia, await Bernanke, data and auction

By Masayuki Kitano

TOKYO, Feb 27 (Reuters) - U.S. Treasuries were steady in Asian trading on Wednesday as investors braced for testimony from Federal Reserve Chairman Ben Bernanke later in the day for clues on how much further the Fed may lower interest rates.

An auction of $26 billion of two-year Treasury notes, data on new orders for durable goods and new-home sales figures will also be in the spotlight later on Wednesday.

Bernanke's testimony is expected to be the highlight of the day when he appears for the central bank's semiannual monetary policy report before the House Financial Services Committee beginning at 10 a.m. Eastern time (1500 GMT).

Market players will be checking whether or not Bernanke places any greater emphasis on downside risks to the economy or inflationary risks, although he is likely to touch upon both, said Hiroki Shimazu, market economist for fixed-income research at Mizuho Securities. "A focal point will be how much of a balance he will maintain in his comments," Shimazu said, adding that this was a particular focus given the differing nuances among members of the Fed's policy-setting committee.

Benchmark 10-year Treasury notes dipped 2/32 in price to yield 3.865 percent <US10YT=RR>, up from 3.858 percent in late U.S. trading on Tuesday.

The two-year note was little changed with a yield of 2.012 percent <US2YT=RR>.

Investors widely expect the Fed to cut the federal funds rate by half a percentage point from the current 3.0 percent at a policy meeting in March.

In his testimony, Bernanke is seen likely to reiterate the rather dovish message put out by Fed Vice Chairman Donald Kohn on Tuesday. Kohn said the danger the U.S. economy will weaken further is a bigger concern than higher inflation. [ID:nN26364877]