TREASURIES-Rise in Europe as crisis solution hopes fade

* Credit rating agency Moody’s said it may slap a negative outlook on France’s Aaa credit rating in the next three months if the country fails to make progress on crucial fiscal and economic reforms.* Meanwhile, risk assets languished in negative territory for a second day after German officials on Monday cautioned against expectations of a quick solution to the region’s two-year-old debt crisis. Equity futures pointed to a lower opening on Wall Street.* But traders said that with the United States in earnings season, positive surprises could help equity markets rally and in turn weigh on Treasuries later in the session. Goldman Sachs and Coca Cola are among those reporting on Tuesday, with Apple due after the market close.* “Analysts have ratcheted down their expectations, so the potential is that they come to the upside and if we see a string of those it could give a bid to the equity market and we’ll see fixed income fade on the back of that,” a trader said.* Benchmark 10-year Treasury yields were 4 basis points lower at 2.12 percent, with 30-year yields down 2 basis points at 3.11 percent.* The 10-year note is now hovering close to support around 2.266 percent, the 38.2 percent retracement of a July to September rally in the maturity. More support is clustered near 2.3 percent to 2.31 percent, an area containing a few daily highs hit in late August.* The Federal Reserve will buy between $2.25 and $2.75 billion of Treasuries on Tuesday as part of “Operation Twist”, the central bank’s latest easing programme.* Barclays Capital strategists said a flattening in the 10/30s portion of the U.S. Treasury curve on Monday may have been exacerbated by the looming purchase operation and expected the curve to resteepen coming out of it.* “The belly of the curve has cheapened significantly over the past few weeks and has room to richen if risk aversion stays high,” the bank’s strategists said.