TOKYO, Dec 19 (Reuters) - U.S. Treasuries inched higher on Wednesday, taking a breather from the previous session’s selloff that sent benchmark yields to their highest level since October on signs of progress in resolving the U.S. “fiscal cliff” budget crisis.
* Negotiations to avert the tax hikes and spending cuts appeared to progress toward a deal as House of Representatives Speaker John Boehner kept the support of his Republican colleagues for compromises in talks with U.S. President Barack Obama.
* “Bonds were sold as we can now see a goal in the fiscal cliff talks,” said Hiroki Shimazu, senior market economist at SMBC Nikko Securities.
“I think it is possible that they will reach a deal before the year-end but even if they can’t for some scheduling reasons, we don’t have to worry about the U.S. going down the cliff,” he said, adding that the benchmark 10-year yield could rise to around 2.0 percent when the two sides finally agree on a deal.
* Some Japanese investors have viewed the 1.8 percent-level as a potential target to buy 10-year notes, but as year-end holidays approach, they are unlikely to make big moves now, Shimazu said.
* Supply concerns also kept gains in check. 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 5-year notes on Tuesday.
* “There were auctions on Tuesday, Wednesday and Thursday last week, and more sales this week. From a supply/demand point of view, there is kind of a heavy feeling,” said Arihiro Nagata, head of foreign bond trading at Sumitomo Mitsui Banking Corp.
* Yields on 10-year Treasuries eased to 1.80 percent on Wednesday in Asian trade, from 1.84 percent in late U.S. trade on Tuesday.
* Yields on 30-year Treasuries fell to 2.89 percent from 3.02 percent on Tuesday.