TREASURIES-U.S. bonds slip as Fed minutes show varying views

* FOMC minutes show divide over policy path

* Short- and intermediate issues pressured by rate-hike bets

* Focus linger on money market conditions due to FDIC fee

HONG KONG, April 6 (Reuters) – U.S. government debt prices slipped in Asia
on Wednesday, adding to Tuesday’s losses, after minutes of the Federal Reserve’s
March policy meeting showed as expected varying views over when the Fed should
start unwinding its ultra-loose monetary policy.

* Traders also focus on money market conditions after a new fee structure
from the Federal Deposit Insurance Corp. has disrupted trading in overnight fund
markets, driving one-month bill rates near zero on Tuesday. Since then,
one-month rates have steadied, although only several basis points above zero.
[ID:nL3E7F60H6]

* Overseas trading volume is light with most trades in short-dated and
intermediate issues on bets that Fed will begin rates in the first half of 2012,
instead of the second half as some traders had thought.

* Ten-year June Treasury futures (TYv1: Quote, Profile, Research) down 2/32 at 118-23/32, finding
interim support in the mid-118 area.

* Cash 10-year government notes down 2/32 in price to yield 3.49 percent,
within striking distance from 3.53 percent, which is the 61.8 percent Fibonacci
retracement from the high yield of 3.77 percent on Feb 9 and the low yield of
3.14 percent on March 16.

* Two-year notes down 1/32 for a yield of 0.82 percent, holding above their
100-week moving average of 0.785 percent.

* The minutes of the Federal Open Market Committee meeting last month
acknowledged the surge in oil and food prices, but most members of the
rate-setting body thought inflationary risk from commodity spike would be
temporary.

* Overall, the FOMC minutes signaled simmering tension between most FOMC
members who reckon the economy still needs policy accommodation, and a vocal
minority, which warns that keeping a super-easy policy much longer is creating
inflation risk, analysts said.

* “This statement highlights to us the ongoing debate within the committee
about the relative balance of risks to the outlook and the appropriate stance of
monetary policy,” Barclays Capital economist Michael Gapen wrote in a note.

* No public appearances by top Fed officials are scheduled.

* On the data front, reports on weekly mortgage applications and Chicago
Fed’s index on U.S. Midwest manufacturing are due, both potentially
market-moving.

* Overseas stock markets were mixed, curbing the decline in bonds. Japan’s
Nikkei average closed down 0.3 percent on worries over production losses
from last month’s earthquake and tsunami, while the MSCI Asia-Pacific ex-Japan
stock index rose 0.7 percent. S&P e-mini futures (ESc1: Quote, Profile, Research) were up
0.2 percent.

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(Reporting by Richard Leong; Editing by Tomasz Janowski)

TREASURIES-U.S. bonds slip as Fed minutes show varying views