SINGAPORE Nov 16 The U.S. 10-year Treasury
yield hovered near a two-month low on Friday, with government
bonds supported by worries that Congress may not be able to
forge a deal in time to prevent large-scale fiscal tightening
from taking effect early next year.
* Ten-year Treasuries rose 4/32 in price to yield roughly
1.581 percent, not far from a two-month low near
1.57 percent set earlier in the week.
* Democrats and Republicans dug in on their long-held
opposing positions on the eve of budget and tax talks on Friday
aimed at avoiding the "fiscal cliff" on Jan. 1. That is when
about $600 billion worth of broad tax increases and deep
spending cuts occur if Congress cannot decide how to replace
them with less extreme deficit-reduction measures.
* "There is no telling what might happen with regard to the
fiscal cliff," said Yoshio Takahashi, fixed income strategist
for Barclays in Tokyo. "A very Treasuries-friendly environment
is likely to persist," he added.
* The fact that the U.S. Federal Reserve seems likely to
step up its buying of longer-term debt to offset the expiry of
"Operation Twist" at the end of the year, is another supportive
factor for Treasuries, Takahashi said.
The minutes of the Fed's October policy meeting released on
Wednesday had underscored market expectations for the Fed to
make such a decision next month.
Under the programme dubbed Operation Twist, the Fed has been
selling short-term securities to buy longer-term debt, with the
aim of pushing down long-term borrowing costs.