TREASURIES-Inch up in Asia before Fed rate decision

By Chikako Mogi

TOKYO, Dec 10 (Reuters) - U.S. Treasuries edged higher in Asia on Monday as investors bought back bonds after the previous session's sell-off, triggered by solid jobs data that trimmed expectations for an aggressive rate cut by the Federal Reserve.

Friday's data showed the economy added 94,000 jobs, slightly above forecasts but strong enough to soothe fears of an imminent recession.

The jobs data also seemed to cement the prospect that the U.S. government's proposal to broker a deal between lenders and borrowers of some subprime home loans might help ease credit jitters and remove the safe-haven premium that has kept Treasuries rallying all year.

The market was now counting on a quarter point reduction in benchmark interest rates from the Fed's Dec. 11 policy meeting, after the jobs data suggested the effects of the credit crisis on the economy did not yet seem sharp enough to warrant a bigger rate cut, traders said.

"There are investors who are buying back Treasuries as the benchmark 10-year yield rose back to 4.1 percent on Friday," said a dealer at a Japanese trust bank.

"Sentiment also improved as the Japanese government bond market trimmed some losses from earlier this session."

The yield on benchmark 10-year notes <US10YT=RR> fell about four basis points to 4.0876 percent from 4.126 percent in late U.S. trade on Friday.

On Friday, the 10-year notes <US10YT=RR> plunged 29/32 for a yield of 4.13 percent, up 12 basis points on the day and a full 30 basis points on the week, the biggest such move since September.