LONDON, Nov 14 (Reuters) - U.S. Treasury yields rose in Europe on Wednesday but were not expected to stray far from their lowest levels since September on concerns about a looming fiscal crisis.
* Ten-year Treasury yields were 3.5 basis points higher at 1.63 percent, having fallen as low as 1.57 percent the previous day. German Bund yields were also rising, although not as much, on expectations of a decent Italian debt auction.
“There was some selling in Asia and that’s continued in to London and we’re underperforming Bunds, but really it’s just flow related, volumes aren’t particularly large so that’s something to do with it,” a trader said.
* More broadly, Treasuries are being supported by worries about the “fiscal cliff” -- the $600 billion in spending cuts and tax increases set to kick in early next year that could send the economy back into recession.
* Both Democrats and Republicans stood their ground on Tuesday in their first gathering since last week’s elections with disagreements over taxes preventing a compromise on deficit reduction.
* “The intensification of the debate around the fiscal cliff should induce another risk-off episode into year-end.” Lloyds Bank strategists said.
* The bank suggested ‘real money’ investors such as pension funds and insurance companies buy Treasuries if 10-year yields fell towards the 1.5 percent area, and said that the spread between Treasuries and Bunds -- currently at 26 basis points, could fall to 20 basis points as the U.S. paper outperformed its German equivalent.
* Concerns in Europe as the IMF and the European Union failed to agree long-term budget goals for Greece also kept markets edgy, despite the growing likelihood the country would receive the aid payments due this year. (Reporting by Kirsten Donovan/editing by Chris Pizzey, London MPG Desk, +44 (0)207 542-4441)