LONDON, Jan 3 (Reuters) - U.S. Treasuries stabilised in Europe on Thursday as investors focused on fresh U.S. political battles in coming weeks over spending cuts, halting a sell-off that followed a deal to avoid sharp tax hikes.
* U.S. benchmark 10-year T-note yields were last at 1.837 percent, unchanged from late New York levels. The yields retreated slightly away from a 3-month high of 1.86 percent reached on Wednesday as bonds sold off after U.S. lawmakers reached a deal to prevent a fiscal crisis.
* President Barack Obama and congressional Republicans face two more months of tough talks on spending cuts and an increase in the nation’s debt limit as the hard-fought deal to avert the so called “fiscal cliff” covered only taxes and delayed decisions on expenditure until March 1.
* “The U.S. still has to address the spending cuts and what form they’re going to take. It’s discouraging that the politicians have politicised this so much to the point of inefficiency so markets are stabilising a bit,” a trader said.
* “We’re seeing some buying between 1.86 and 1.85 percent (yield level) in 10s and that’s going to limit any down trade,” he added.
* The 30-year T-bond yield was last 0.6 bps lower at 3.03 percent, having risen as high as 3.06 percent on Wednesday, the highest since mid-September.
* Yields may rise further if data, including the closely watched jobs report for December due out on Friday, show the U.S. economy is improving.
* UBS technical analyst Richard Adcock said the latest move higher in 10-year yields placed the market within striking distance of 1.90/93 percent, the September and October monthly highs. A closing break above 1.93 percent could see the yield rising to 2.11-2.15 percent, he said.