SINGAPORE Nov 28 U.S. 10-year Treasuries held
steady on Wednesday, clinging to gains made the previous day on
worries about the lack of progress toward averting a fiscal
crisis that could derail an economic recovery.
* At issue is the so-called "fiscal cliff", a series of
automatic tax hikes and spending cuts that will begin in early
2013 unless Congress and the White House agree on measures to
Senate Majority Leader Harry Reid said on Tuesday that he is
disappointed that there has been "little progress" among
Democratic and Republican lawmakers as they try to reach a deal
to avoid the year-end "fiscal cliff".
* Ten-year notes held steady in price in Asia to yield
roughly 1.639 percent, little changed from late U.S. trade on
Tuesday. Worries about the lack of headway in the fiscal
negotiations had helped drag the 10-year yield down by about 3
basis points on Tuesday.
* While bond yields are likely to climb if a deal is reached
to avoid the fiscal cliff, whether there will be a sustained
rise will hinge on the contents of the deal, said a portfolio
manager for a major Japanese bank in Tokyo.
If there is only an agreement to buy time and put off the
fiscal cliff for three to six months or a year, concerns over
political deadlock are likely to persist, he said. In that case,
a rise in the 10-year yield may prove short-lived, with buyers
likely to step in at levels near 1.9 percent, he added.
Treasury yields, however, could see a more enduring rise if
a so-called "grand bargain" is struck over long-term deficit
reductions, the portfolio manager said.
"That would dispel worries about politics and Congress, and
could make it easier for risky assets to head higher over the
medium to longer term. Bonds are likely to be sold initially and
bond yields might keep heading higher from there," he said.