LONDON Feb 26 U.S. 10-year T-note yields fell
to one-month lows in Europe on Tuesday as investors unnerved by
an inconclusive result in Italian elections snapped up low-risk
No party or likely coalition won enough seats to form a
majority in the Italian upper house, raising the risk that
policy paralysis in the highly indebted country would revive
wider fears about euro sovereign debt.
The vote sparked a sell-off in lower-rated euro zone assets
and a rally in assets perceived as safe havens, such as German
Bunds and U.S. Treasuries.
Benchmark 10-year U.S. T-note yields were last
flat at 1.87 percent, having hit a one-month low of 1.836
percent earlier in the session. T-note futures were 6/32
higher at 132-22/32.
"Risk appetite has waned on the back of the uncertain
Italian election results. Political uncertainty seems to be the
driving force today," RIA Capital Markets Nick Stamenkovic said.
The fall in yields was limited by caution before Federal
Reserve Chairman Ben Bernanke's testimony before the Senate
Banking Committee later in the day and looming debt sales.
The Treasury will auction $35 billion in five-year notes on
Tuesday and $29 billion in seven-year notes on Wednesday. It
sold $35 billion in two-year notes on Monday.
"We could see (10-year U.S.)yields going down to 1.80
(percent). Below that we need to see further deterioration in
the political backdrop in Italy and/or further signs of weakness
in the global economy," Stamenkovic said.
The 1.80 percent level has been the floor for T-note yields
for this year, except for the first session when yields rose as
markets cheered a deal to avoid the 'fiscal cliff' of $600
billion in U.S. tax hikes and budget cuts.
About $85 billion of across-the-board spending cuts could
still enter into force on Friday, however, acting as a drag on