LONDON Feb 19 U.S. government bonds were steady
in Europe on Tuesday, with better-than-expected German data
offset by worries over the impact of potential spending cuts on
the U.S. economy and political uncertainty in Italy.
German analyst and investor sentiment soared to its highest
since April 2010, according to the ZEW think tank, with the data
boosting the euro and European shares and causing a temporary
dip in safe-haven German Bunds and U.S. T-notes.
But the price dip was immediately met by buying interest
from investors concerned that an economic recovery could be
derailed by across-the-board spending cuts of about $85 billion
that could take effect on March 1 if lawmakers fail to agree on
a plan to avoid them.
Also supporting Treasuries, one of the main assets used as a
refuge from the euro zone's debt troubles, were concerns that
Italian elections on Feb. 24-25 could result in a fragmented
parliament that could hamper any future reform efforts.
"We had a little bit of a sell-off after the ZEW ... but
because of the (Italian) elections you'll maybe see some better
bids in Bunds and that filters through to Treasuries," one
Ten-year T-note yields were last 0.3 basis
points lower at 2.0017 percent. T-note futures were flat
at 131-17/32, some 2/32 higher than the lows hit immediately
after the ZEW release.
T-note yields could rise to around 1.85 percent by the end
of this month, Tomohisa Fujiki, interest rate strategist for BNP
Paribas in Tokyo, said.