US Treasuries gained on Thursday ahead of the policy decision by the Federal Open Market Committee (FOMC) with markets widely expecting the Fed to announce a third bout of quantitative easing, or QE3.

Meanwhile, the US government sold $13bn-worth of 30-year bonds today for an average yield of 2.896%, under the forecast of 2.929%, according to a Bloomberg survey. The bid-to-cover ratio improved to 2.68 from the average 2.62 at the last 10 sales.

The borrowing rate on a 10-year Treasury on the secondary market was down 3.4 basis points at 1.72%.

The Italian Treasury has raised a total of €6.5bn (the top-end of its €4.25-6.5bn target) with the issuance of bonds maturing in 2015, 2017, and 2026. Borrowing costs at all three auctions fell on the previous issuance.

On the secondary market, Italian 10-year bond yields eased by two basis points to 5.009%.

Meanwhile, yields on Spanish 10-year debt edged slightly higher on concerns that the south European nation may hold off from requesting aid from the European Central Bank (ECB). France is reportedly worried that the Spanish government may backslide in its reform programme, pressuring the nation to ask for help to make sure that the current drop in sovereign debt yields maintains its downward course.

Spanish Prime Minister Mariano Rajoy has repeatedly said this week that he is still "undecided" on whether or not he will request a bailout above and the beyond the funds already set aside for the country's financial sector.

BC

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