TOKYO, March 28 U.S. Treasuries were firm on
Thursday with the benchmark yield stuck near three-week low hit
the previous day after Italy's soft bond auction fanned worries
the euro zone's debt crisis could take a turn for the worse.
* The yield on 10-year notes traded at 1.837
percent, near Wednesday's low of 1.833 percent and its March 4
low of 1.827 percent.
* "The main driver seems to be Europe again, as the chance
of a grand-coalition in Italy seems to be thin. Given that we've
had some sort of crisis in Europe every May in recent years, I
feel like we could buy Treasuries a bit more," said a trader at
a Japanese bank.
* Bonds rallied on Wednesday even as the Treasury sold $35
billion in new five-year notes to solid demand, the second sale
of $99 billion in new coupon-bearing debt this week.
* Italy paid more to borrow over five years than it has
since October at an auction on Wednesday as lack of progress in
forming a new government and worries about Cyprus's bailout hit
demand, although the 10-year debt auction
* Centre-left leader Pier Luigi Bersani has been in talks
with rival parties this week to try to form a government, but
there is little sign he can muster enough seats to do so and
Italians may have to return to the polls, dragging out the
* Treasuries were also supported by fear that the Cyprus
rescue plan, which imposes heavy losses on depositors in the
country, may prompt depositors and bond investors in other
fragile euro zone countries to shift funds to safer assets, such
* Cypriots are expected to descend in their thousands on
Thursday on banks, which reopen with tight controls imposed on
transactions to prevent fleeing depositors from cleaning out the
vaults in a catastrophic bank run.
* In addition, month-end buying ahead of a long weekend also
underpinned Treasuries. The U.S. bond market will close at 2
p.m. (1800 GMT) on Thursday and it will be shut on the Good