TREASURIES-Dip in Asia on stock rise, data awaited
By Rika Otsuka
TOKYO, May 27 (Reuters) - U.S. Treasuries dipped in Asia on Tuesday as a rise in regional stocks prompted some investors to shift funds to equities from government debt, while others eyed a raft of data this week for more clues on the Federal Reserve's future policy path.
Activity was light as market participants waited for markets in the United States to resume trading later in the day. The Treasury market was closed on Monday for the Memorial Day holiday.
Treasuries were hurt by concerns that surging food and oil prices would sustain inflation pressures and prompt the Fed to start raising interest rates later this year from the current 2 percent level.
Short-term interest rate futures now indicate the Fed will keep interest rates steady for at least three policy meetings before possibly raising rates in the fourth quarter. FEDWATCH
The benchmark 10-year yield stayed within sight of the psychologically important 4 percent level as crude oil hovered near a record high above $135 a barrel hit last week. U.S. crude oil rose $0.90 to 133.09 CLc1 on Tuesday.
"The benchmark yield is slowly but steadily rising as inflation fears dominate global bond markets," said a senior trader at a Japanese brokerage.
"But the yield may not try the key 4 percent level so easily as many are worried about possibilities of a weaker-than-expected U.S. economy and a return of credit tightness," the trader said.
European shares were dented on Monday after Swiss bank UBS (UBSN.VX) said it may suffer additional losses from its exposure to U.S. residential mortgages. [.F]
June T-note futures TYv1 slid 6/32 to 115-10.5/32. The lead contract struck a four-month low of 114-10/32 earlier this month.
The 10-year Treasury note dipped 1/32 in price to yield 3.854 percent US10YT=RR, little changed from U.S. trade on Friday.
The two-year Treasury note edged down 1/32 in price to yield 2.473 percent US2YT=RR, up 3 basis points from U.S. trade late last week and well above the central bank's federal funds rate.
Tokyo's Nikkei share average .N225 climbed 0.8 percent, while Asian shares excluding Japan .MIAPJ0000PUS rose 0.7 percent. [MKTS/GLOB]
Investors awaited reports on the housing sector and the Conference Board's index of consumer sentiment due later in the day for clues about the health of the world's biggest economy.
Other important data due this week includes personal consumption expenditures index for April on Friday. It includes the core PCE price index, which excludes food and energy costs and is one of the Fed's favourite measures of inflation.
Investors will also pay close attention to speeches from top Fed officials, including chairman Ben Bernanke on Thursday, for more clues about the direction of rates. On Tuesday, San Francisco Fed President Janet Yellen is due to speak. (Editing by Michael Watson)
