Bonds Steady, Taking Cue From Overnight Stabilization

Federal Reserve Board Chairman Ben Bernanke.
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Federal Reserve Board Chairman Ben Bernanke.

U.S. Treasury prices held steady in Asia on Tuesday after bouncing back overnight with the benchmark 10-year yield falling from a near two-year high, although investors remained cautious about the Federal Reserve's plan to start rolling back its stimulus.

The yield on 10-year notes stood at 2.5442 percent, holding steady from U.S. trade of 2.54 percent. The benchmark yield rose as high as 2.667 percent, the highest since August 2011, in overnight U.S. trade.

(Read More: Why the Rise in Treausury Yields May Be OK)

"We think eventually U.S. yields may go up more. But at this point the move was so rapid from 2.2 percent to 2.6 percent that it's getting to a point maybe that we are going to be stabilizing from here. In my opinion, it may go lower depending on the situation," said Tadashi Matsukawa, head of Japan fixed income at PineBridge Investments.

Fed Chairman Bernanke rattled investors last week when he said the U.S. central bank may reduce its bond purchases of $85 billion a month in Treasurys and mortgage-backed securities starting later this year.

"We are not going to go straight up to 3 percent, or 4 percent," Matsukawa said. "The economy is not very strong yet. That's not only China, not only emerging markets but globally Europe, Japan and U.S. itself. Inflation is not accelerating at all. If (U.S.) interest rates continue to rise, it will kill the housing market."

(Read More: Market Consensus: Get Ready for 3% Treasury Yields)

The yield on 30-year notes was at 3.5538 percent, compared with 3.56 percent in U.S. trade on Monday.