* 10-yr yield falls to 1.4365 pct; lowest since early 1800's
* 2-yr yield slips to 10-month low below 0.2 percent
* Safe-haven demand expected to support this week's sales
By Lisa Twaronite
TOKYO, July 23 U.S. 10-year Treasuries rallied
in Asian trading on Monday, sending yields to historic lows, as
heightened fears about Spain's ability to stave off a sovereign
bailout prompted investors to seek out safe-haven fixed income
Over the weekend, the Spanish region of Murcia said it would
seek government financial assistance, and media reported half a
dozen governments were ready to follow in the footsteps of
Valencia, which said on Friday it would seek help.
Fears also rose about Greece's ability to stay afloat, after
its prime minister said on Sunday that the country was in a
"Great Depression" similar to the one in the 1930s, as
international lenders were scheduled to gather in Athens to
discuss the terms of further rescue payments.
The European Central Bank said on Friday that Greek
government bonds will be ineligible for banks to use as
collateral to borrow from the ECB from July 25.
The 10-year yield was at 1.4415 percent, after
dropping as low as 1.4365 percent earlier in the Asian session.
That was its lowest level since the early 1800's, according to
data compiled by Reuters.
"It is easy to understand that the European situation is not
good, which is driving yields down. From now, a lot of the
market's direction will also depend on U.S. data," said Tomoaki
Shishido, fixed income analyst at Nomura Securities.
Any signs that the slowdown in the U.S. economy is
stabilising and weathering the effects of Europe's credit storm
would lesson the chances of further stimulus from the Federal
Reserve, which could finally put a floor under yields,
Fed Chairman Ben Bernanke has said the central bank remains
prepared to act if necessary but has so far refrained from
outlining any steps.
Investors expect the Fed to eventually decide to either make
a third round of bond purchases, known as quantitative easing,
or cut the interest it pays banks on their excess reserves.
Expectations of the latter helped push the yield 2-year
Treasuries below the 0.2 percent level for the
first time since September. It dropped as low as 0.1975 percent
before rising to 0.2015 percent, still short of 0.210 percent in
Friday's late U.S. trading
"At these yield levels, it is difficult to think about
selling Treasuries right now," said a fixed-income fund manager
at a Japanese trust bank in Tokyo.
This demand is expected to support the Treasury Department's
debt sales this week, he said.
Treasury will sell a combined $99 billion in two-year,
five-year and seven-year notes next week, starting on Tuesday
with $35 billion auction of two-year notes.
The yield on 30-year bonds stood at 2.532
percent, also down from 2.541 percent in Friday's late U.S.