Bonds Rise in Asia, Italy, Fed Meeting Eyed

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U.S. Treasuries firmed in Asia onMonday, with benchmark yields creeping back toward last week'sthree-week low, as political rumblings in Italy and expectationsof more easing this week from the U.S. Federal Reserve offsetselling pressure ahead of this week's supply.

Italy's political parties began maneuvering on Sundaybefore elections expected in February as supporters oftechnocrat Prime Minister Mario Monti tried to persuade him tostay in politics and continue his economic reform agenda.

Monti's surprise announcement on Saturday that he intendedto resign after the approval of next year's budget heighteneduncertainty over his successor. The uncertainty is likely todrive up Rome's borrowing costs as well as tensions in the eurozone after months of calm in the bond market.

A better-than-expected November jobs report did little toalter expectations that the U.S. Federal Reserve is likely tomuster some additional bond buying plans at its two-day meetingwhich will end on Wednesday. The Fed's "Operation Twist"stimulus program will expire this month.

The Labor Department reported that 146,000 jobs werecreated in November, confounding predictions of weakness. Thejobless rate fell to 7.7 percent, the lowest since December2008, although it was largely due to fewer people looking forwork.

"The focus turned away from the U.S. economy and backtoward worries about Europe's debt situation, but it could turnback to the U.S. quickly if there are developments in the'fiscal cliff' talks," said a fixed-income fund manager at aJapanese asset management firm.

President Barack Obama met with Republican Speaker of theHouse of Representatives John Boehner on Sunday to discussaverting the "fiscal cliff" of $600 billion worth of taxincreases and spending cuts scheduled to take effect next year,but no deal was reached.

Yields on 10-year Treasuries were at 1.613percent on Monday in Asian trade, down from 1.630 percent inlate U.S. trade on Friday.

On Thursday, benchmark yields fell as low as 1.564 percent. Yields on 30-year Treasuries fell to 2.801percent from 2.816 percent on Friday.

The Treasury will sell $32 billion in three-year notes onTuesday, $21 billion in 10-year notes on Wednesday and $13billion in 30-year bonds on Thursday.