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TREASURIES-Benchmark U.S. debt falls in Asia; Europe, Fed eyed

Published: September 12, 2012 | 7:26 am
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U.S. 10-year Treasuries fell on Wednesday as investors sought riskier assets ahead of a German court’s expected approval of the euro zone’s bailout fund and a Federal Reserve meeting at which some investors expect it to muster more stimulus steps.

* The U.S. Federal Reserve will begin its two-day meeting later in the day. Last week’s downbeat employment data has heightened expectations that the central bank could decide on more bond purchases to stimulate the economy.

Steps could include a third round of quantitative easing or an extension of the period for which the Fed has committed to keep rates near zero, which now goes through late 2014.

The possibility of more easing lifted equities around Asia which prompted investors to reduce positions in bonds.

* Germany’s constitutional court will rule on the euro zone’s bailout fund later on Wednesday. An approval would clear the way for progress on reining in the debt crisis, but some market participants were sceptical it would lead to an immediate solution.

* “It’s not getting better. The tail risk has been eliminated — the fat tail, black swan risk in the short term, but the fundamental problem is, they need to grow out of these problems and take bigger steps,” said a fixed-income trader at a European brokerage in Tokyo.

“Time is the only thing that is going to solve it. They can’t solve anything next week. They’re on the path, but they have to do the work,” he added.

* Adding to investors’ appetite for risk, reports said Spain is considering obtaining help from the European Central Bank’s bond-buying programme. But that country is not planning a full sovereign bailout, Prime Minister Mariano Rajoy was quoted as saying on Wednesday in Finnish newspapers.

* The yields on 10-year Treasuries rose to 1.709 percent, up from 1.690 percent in U.S. trading on Tuesday.

* The 30-year bond yield rose to 2.864 percent from 2.840 percent in late U.S. trading on Tuesday.

* On the supply side, the U.S. Treasury sells $21 billion of 10-year notes on Wednesday and $13 billion in 30-year bonds on Thursday.


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