LONDON, Dec 19 (Reuters) - U.S. Treasuries inched higher on Wednesday, halting losses this week in the absence of further progress towards a deal to avert a $600 billion fiscal crunch before year-end.
* Gathering momentum in negotiations to avert the so-called fiscal cliff triggered a fall in Treasuries earlier this week, as signs of compromise from Republicans and Democrats fuelled optimism that a deal will be struck before a Dec. 31 deadline.
* However, Republican lawmakers stepped up pressure on U.S. President Barack Obama to cede ground on tax rises on Tuesday by proposing their own tax bill.
* “It seems like there was some overly optimistic outlook for the House Republicans coming together with Obama for averting the fiscal cliff. Now that optimism is deteriorating a little bit, and that’s helped bond prices,” a trader said.
* Treasury futures rose 11/64 to 132-7/64, and 10-year yields fell to 1.80 percent, down from 1.84 percent in late U.S. trade on Tuesday.
* “We’ve found some support once we broke through north of 1.80, that has been enough to bring in some buying,” the trader said.
* Ciaran O‘Hagan, strategist at Societe Generale, said any future compromise between Republicans and Obama over major issues such as Medicare, the government health insurance programme for seniors, and taxes on estates could see Treasuries break below an important support level at 1.87 percent.
* “, we doubt such a compromise would be reached on these two issues at this time,” he added
* Plentiful supply of U.S. debt also kept a lid on gains. The Treasury will sell $29 billion in seven-year notes later on Wednesday, followed by $14 billion in five-year Treasury Inflation-Protected Securities (TIPS) on Thursday. It sold $35 billion in five-year notes on Tuesday.