TREASURIES-Edge up in Asia before Bernanke, data
By Rika Otsuka
TOKYO, Jan 17 (Reuters) - U.S. Treasuries edged higher in Asia on Thursday as investors awaited comments by Federal Reserve Chairman Ben Bernanke later in the day for clues on how aggressively the central bank may slash interest rates.
Treasury yields, which move inversely with prices, stayed near multi-year lows as fears of a recession and expectations for a hefty near-term Fed rate cut supported the bond market.
But activity was limited as many investors retreated to the sidelines before Bernanke testifies on the near-term outlook for the U.S. economy before the House Budget Committee at 1500 GMT.
Bernanke indicated last week that the Fed is ready to cut interest rates aggressively to support growth, helping reinforce expectations for a half-percentage-point cut in the benchmark federal funds rate -- currently at 4.25 percent -- at the Fed's policy meeting on Jan. 29-30.
More signs of U.S. economic problems this week prompted some market players to think the Fed might slash interest rates by as much as three-quarters of a percentage point before the end of the month.
If investors take Bernanke's comments later in the session as a hint that the Fed is willing to make a steep 75 basis point rate cut, that could push down the 10-year Treasury yield back to 4-1/2-year lows hit the previous day, traders said.
"Few think a rally in Treasuries has run its course," said a senior trader at a Japanese brokerage.
The benchmark 10-year note rose 8/32 in price to yield 3.708 percent US10YT=RR, nudging down from 3.740 percent in late U.S. trade on Wednesday. It fell as low as 3.621 percent in the previous session, the lowest since July 2003.
The two-year note edged up 2/32 in price to yield 2.482 percent US2YT=RR, compared with 2.516 percent in late Wednesday New York trade. The yield struck three-year lows around 2.43 percent the previous day.
March 10-year futures TYv1 climbed 2.5/32 to 116-03.5/32.
They rose as high as 116-22.5/32 on Wednesday, the highest since July 2003.
In addition to comments from Bernanke, market participants will look to data on the slumping housing sector and a report on weekly initial jobless claims later in the session for clues about the state of the world's biggest economy.
December housing starts are forecast to have decelerated to a 1.14 million annual rate, from a 1.187 million rate in the prior month. (Editing by Michael Watson)
