TREASURIES-Rise in Asia on buybacks as JGBs rally

By Masayuki Kitano

TOKYO, April 8 (Reuters) - U.S. 10-year Treasury notes rose in Asia on Tuesday as a rally in Japanese government bond futures triggered buybacks in Treasuries following a sell-off the previous day.

"It seems like JGBs may be behind the move," said a senior trader for a European investment bank, adding that market players have recently tended to take short positions in Treasuries and buy them back on dips.

The focus in the near term will be U.S. banks' quarterly earnings announcements later in April, the trader said. Besides any write-offs, investors will be watching to see if the banks announce any steps to bolster their capital, he said. [RESF/US]

"Investors are watching what the impact might be on monetary policy if the financial sector calms down," the trader said, adding that such an outcome could reduce market expectations for Federal Reserve rate cuts and hurt Treasuries.

Ten-year Treasury notes rose 6/32 in price to yield 3.520 percent US10YT=RR, down nearly 3 basis points from late U.S. trade on Monday.

The two-year note rose nearly 2/32 in price to yield 1.904 percent US2YT=R, down about 3 basis points from late New York.

The lead June contract for 10-year Japanese government bond futures rose 0.32 point to 139.75 2JGBv1, as dealers rushed to cover short positions in the wake of an unexpected 0.9 percent fall in the benchmark Nikkei share average .N225. [JP/]

Later this session, Treasuries could take cues from the release of minutes from the Fed's March 18 policy meeting, when the central bank cut interest rates by 0.75 percentage point to 2.25 percent.

Treasuries fell in U.S. trading on Monday, briefly pushing up the two-year note's yield near 2 percent as a few glimmers of optimism about the beleaguered banking sector bolstered stocks, curbing the safe-haven appeal of government debt.

News that Washington Mutual (WM.N), the largest U.S. savings and loan, was close to obtaining a $5 billion injection that may soothe fears about its ability to meet capital requirements stemming from its mortgage losses, gave a lift to U.S. financial shares on Monday. [ID:nN07475686]