LONDON, April 8 U.S. Treasury prices edged lower
on Monday as the recent rally prompted some to take profits but
Asian demand, fuelled by a hunt for higher-yielding bonds in the
wake of Japan's stimulus attempts, was expected to resume.
Benchmark 10-year yields rose 1 basis point to
1.72 percent on Friday with traders citing some profit taking
and technical-induced buying after yields hit their lowest
levels of 2013 at 1.677 percent on Friday.
Demand for U.S. debt has risen sharply in recent sessions
after the Bank of Japan unveiled a mammoth bond buying plan
designed to stimulate Japan's moribund economy.
"Is the pull back today going to be that deep? No, I don't
think so," a trader said adding he expected yields to begin
falling again when U.S. market participants started arriving at
their desks later in the day.
"The reality is that the BoJ actions are the winner here.
Their commitment is huge and the Japanese investor base will
need to get out of JGBs as the yield goes lower. They'll have to
sell their yen and go and buy U.S. Treasuries."
Ten-year Japanese government bonds (JGBs) last yielded 0.53
percent, with strategists suggesting the
bond-buying operations that started on Monday could eventually
push yields as low as 0.2 percent, making U.S. debt relatively
Technical charts showed that a drop in U.S. yields could
accelerate on any breach of 1.648 percent -- the 61.8 percent
Fibonacci retracement of the rise in yields seen between July
2012 and March 2013.
"Should the 1.6480 (Fibonacci retracement) be eroded this
will introduce scope to the 1.55/1.5280, the November 2012 low
and 78.6 percent retracement," Commerzbank technical analyst
Karen Jones said in a note.
"This is regarded as the last defence for the 1.3750 July
(Reporting by William James/editing by Chris Pizzey, London MPG
Desk, +44 (0)207 542-4441)