Bonds Rise in Asia, Italy, Fed Meeting Eyed

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U.S. Treasuries firmed in Asia on Monday, with benchmark yields creeping back toward last week's three-week low, as political rumblings in Italy and expectations of more easing this week from the U.S. Federal Reserve offset selling pressure ahead of this week's supply.

Italy's political parties began maneuvering on Sunday before elections expected in February as supporters of technocrat Prime Minister Mario Monti tried to persuade him to stay in politics and continue his economic reform agenda.

Monti's surprise announcement on Saturday that he intended to resign after the approval of next year's budget heightened uncertainty over his successor. The uncertainty is likely to drive up Rome's borrowing costs as well as tensions in the euro zone after months of calm in the bond market.

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

The Labor Department reported that 146,000 jobs were created in November, confounding predictions of weakness. The jobless rate fell to 7.7 percent, the lowest since December 2008, although it was largely due to fewer people looking for work.

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

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

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

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

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