TREASURIES-Prices dip as traders prepare for supply, Fed

* Traders position for refunding announcement, Fed

* Fed's two-day policy meeting begins

* U.S. non-farm payrolls due Friday will also be focus (Adds trader quote, updates prices, changes byline)

By Chris Reese

NEW YORK, Nov 3 (Reuters) - U.S. government securities prices slid on Tuesday as traders prepared for Wednesday's Treasury refunding announcement and for a statement from the Federal Reserve on monetary policy.

Dealers must make room for new supply that will arrive next week, but the Treasury will announce the size and terms of those three refunding auctions on Wednesday, after which the securities can be bought and sold on a "when-issued" basis.

Investors often move to cheapen Treasuries prices ahead of such auctions, and many are worried that the appetite for the large doses of new U.S. government debt could eventually wane.

"The setup for supply next week is getting under way, and that is why the market is moving the way it is," said Marty Mitchell, head of government bond trading at Stifel Nicolaus in Baltimore.

The benchmark U.S. 10-year Treasury note US10YT=RR traded 15/32 lower in price, with its yield rising to 3.48 percent from 3.42 percent late on Monday.

Thirty-year bonds US30YT=RR, which were in the plus column early in the session, traded down 1-10/32, with their yields rising to 4.33 percent from 4.26 percent on Monday.

The more intense pressure on longer-dated instruments steepened the Treasury curve, with the spread between two-year note yields and 10-year note yields widening to 256 basis points, which was the broadest gap in two and a half months.

In addition, investors were keenly awaiting the policy statement from the Fed's Federal Open Market Committee due for release on Wednesday afternoon at the end of the FOMC's two-day meeting.

William Sullivan, chief economist at JVB Financial Group in Boca Raton, Florida, said the FOMC's policy statement is particularly in focus in the bond market "where there has been talk that the Fed could change the wording in the statement to lay the foundation for tighter monetary policy at some point in the future."

Despite some improved data on the housing and industrial sectors, the economic recovery process is "tenuous" and would be hurt by tighter monetary policy, he said.

"If there's any hint from the Fed that they want to withdraw liquidity, it will be received very negatively by both the marketplace and the business community," Sullivan said.

One point being discussed is whether more hawkish members of the FOMC will manage to make the Fed statement slightly less dovish by removing the word "extended" from the Fed's current commitment to keep interest rates low for an extended period.

If the market has a "knee-jerk reaction to an altering of the language, which we do not expect to be policy-consequential, we will look at that as an opportunity to become friendly to the front end, and for the yield curve steepening bias to continue," said John Spinello, chief fixed-income technical strategist at Jefferies & Co in New York.

On the economic indicator front on Tuesday, U.S. factory orders rose in September, as forecast. The report had no discernible impact on U.S. Treasuries prices. [ID:nN03499628]

The most influential U.S. economic report this week is the October nonfarm payroll report due Friday.

The median of forecasts from economists polled by Reuters is for payrolls to have contracted by 175,000 in October after narrowing by 263,000 jobs in September.

In late afternoon trade, two-year notes US2YT=RR were unchanged in price to yield 0.93 percent. Five-year Treasury notes US5YT=RR were down 5/32 in price, with their yields rising to 2.37 percent from 2.33 percent late on Monday. (Additional reporting by Ellen Freilich; editing by Leslie Adler)