Slip in Asia as US stock futures find footing

TOKYO: US Treasuries slipped on Monday as US stock futures regained their footing and Asian markets trimmed losses, with dealers preparing for the Federal Reserve's last batch of bond purchases while keeping an eye on the steady slide in equities.

S&P e-mini futures nudged slightly into positive territory as many Asian markets trimmed early losses and were poised to finish the day well off the lows.

The MSCI index of Asia-Pacfic stocks outside Japan was down 0.5 percent after having slid nearly 1 percent earlier, outperforming the 1.4 percent drop in the S&P 500 on Friday.

Some traders said Treasuries lost ground on a Financial Times article saying that a number of Wall Street's biggest banks were preparing to lower their use of Treasuries during the August deadline for avoiding a US technical default.

September T-note futures were down 2.5/32 at 123-14/32. Volume was slightly more active than usual in Asia, with about 26,000 lots changing hands.

Ten-year notes shed 3/32 in price to yield 2.986 percent, up a basis point on the day and off a six-month low of 2.919 percent struck last week. Two-year notes were steady to yield 0.412 percent. On trading platform BrokerTec, 10-year notes were the most active issue.

The yield curve between two- and 10-year yields was mostly steady at 257.4 bps.

Last week, the Fed said it will buy $50 billion of Treasuries, the final series of government bond purchases that marks the last phase of the $600 billion programme it launched in November 2010 to prevent another recession.

Some economists, such as Northern Trust Chief Economist Paul Kasriel, have started to say the Fed should consider doing a third round of quantitative easing if the economy loses more steam and unemployment starts to rise further.

US President Barack Obama's panel of outside economic advisers is recommending measures to spur hiring in construction, tourism, manufacturing and healthcare, the panel's chief and General Electric chief executive, Jeff Immelt, said in a Wall Street Journal opinion article.

Copyright Reuters, 2011